UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 
LIBRARY 


A    TREATISE 


ON  THE  LAW  OP  THE 


CONTRACT  OF  PLEDGE 


AS  GOVERNED  BY  BOTH  THE 


Common  Law  and  the  Civil  Law. 


By   henry    DENIS, 

Of  the  New  Orleans  Bar, 

Professor  of  Civil  Law  at  the  Tulane 
University  of  Louisiana, 


NEW  ORLEANS: 

PUBLISHERS. 
1898. 


3)/ 


[  C  {  c 


Entered  according  to  Act  of  Congress,  in  the  year  1898,  by 

F.  F.  HANSELL  &  BRO.,  LTD., 

In  the  office  of  the  Librarian  of  Congress,  at  Washington,  D.  C. 


3^1  544 


PRESS  OF  ELECTROTYPED  BV 

L     GRAHAM    8c  SON,   LTD.,  T.  A.  SLATTERV  &   BRC, 

NEW  ORLEANS,   LA.  „^^  ORLEANS,    LA. 


4o 


PREFACE, 


I  would  not  have  thought  of  writing  at  this  late  day  a  book  on  the 
Contract  of  Fledge  of  the  Common  Law  exclusively.  Several  treatises 
have  already  been  published  on  that  subject.  Text- books,  besides,  are 
too  often  mere  repetitions  of  one  another.  My  object  in  this  work  is  to 
arrive  at  a  better  knowledge  and  understanding  of  the  law  of  Pledge  of 
the  Common  Law  by  comparing  it  with  the  law  of  Pledge  of  the  Civil 
Law,  from  which  it  descends.  The  comparative  study  of  scientific 
subjects  is  always  profitable,  whether  it  is  that  of  comparative 
anatomy  or  that  of  comparative  jurisprudence.  Both  Judge  Story  and 
Mr.  Schouler  in  their  Treatises  on  Pledges  recognized  the  relative 
obscurity  and  uncertainty  of  the  Common  Law  on  that  subject,  and 
suggested  that  assistance  could  be  derived  for  its  better  understanding 
from  the  knowledge  of  the  Civil  Law.  This  is  my  reason,  and,  if 
necessary,  my  excuse,  for  presenting  this  book  to  the  consideration  of 
the  Bench  and  Bar  of  this  country. 

HENRY    DENIS. 


TABLE  OF  CONTENTS. 


CHAPTER  I. 


l*A<iKS. 


Introduction.  Real  and  personal  securities.  Contract  of 
pledge  known  to  the  Mosaic  Law.  Origin  of  the  word 
2)ledge.  Pigmis  of  the  Roman  Law.  Growing  importance 
of  personal  property.  Hence  the  great  importance  of  the 
pledge  in  modern  times.  It  is  the  pivot  of  commerce. 
Difference  between  the  chattel  mortgage  and  pledge.  Con- 
fusion in  Common  law  in  this  respect.  M'o  confusion  in 
the  Civil  law.  Equitable  liens  of  the  Common  law  have 
encroached  upon  the  law  of  pledge  and  caused  a  departure 
from  its  fundamental  principles 1-21 

CHAPTER   II. 

Nature  and  subject  matter  of  the  pledge.  What  things  may 
be  pledged.  Possession  of  the  pledge  by  pledgee  is  indis- 
pensable. Therefore  what  can  not  be  delivered  to  him  can 
not  be  pledged.  A  thing  maybe  sold  which  can  not  be 
pledged.  Incorporeal  things  could  not  be  pledged  under 
the  Roman.  They  may  be  imder  modern  Civil  law  and 
under  the  Common  law.  Transfer  of  incorporeal  things, 
when  a  sale  and  when  a  pledge.  Xotice  to  debtor  of  claims 
indispensable  in  the  Civil  law.  Xot  necessary  in  the  Com- 
mon law.  Real  rights  in  the  Civil  law  may  be  immovable 
or  movable.     Only  the  latter  can  be  pledged 28-86 

CHAPTER   III. 

Things  in  expectancy  or  which  have  a  mere  potential  exist- 
ence can  not  be  pledged  because  possession  can  not  be 
given  to  the  pledgee.  Error  of  Judge  Story  on  this  subject 
in  respect  to  the  Civil  law.  Difference  between  the  pledge 
and  the  mortgage  of  the  Roman  law  as  shown  by  Domat. 
Also  by  Troplong.     Fulucia  of  the  Roman  law 8>S-4.t 

CHAPTER  IV. 

Can  rights  of  inheritance  be  pledged ';:'  In  the  Civil  law.  rights 
of  inheritance  can  not  be  the  subject  of   a  contract  by  the 


vi  Table  of  Contents. 

PAGES. 

heir  while  the  ancestor  is  alive.  The  prohibition  is  founded 
on  reasons  of  morality  and  public  order.  Not  so  in  the 
Common  law.  There,  the  sole  (luesti'on  is  the  sufficiency  of 
interest  in  the  heir  to  form  the  consideration  of  a  contract. 
In  the  Civil  law,  the  rights  of  inheritance  after  the  death  of 
the  ancestor  may  be  pledged  by  the  heir  if  the  estate  is 
composed  of  personal  property.  A  lease  of  real  estate  may 
be  pledged.  A  patent  of  invention  may  be  pledged.  Works 
of  the  mind  may  be  pledged  47-iil 

'    CHAPTER   V. 

A  pledge  may  be  given  <o  secure  the  fulfilment  of  any  ob- 
ligation, besides  the  payment  of  money.  It  may  be  given 
also  to  secure  the  debt  of  another  person  than  the 
pledgeor.  In  that  case  the  pledgeor  is  not  personally 
bound.  lies  non  persona  debet.  The  pledge  being  an  ac- 
cessory contract  falls  with  the  principal.  Accesfiorihm 
seqiHtur  principale.  In  case  of  the  pledge  securing  an 
immoral  agreement,  the  pledgeor  has  no  right  of  action  to 
recover  the  thing  pledged 6;:J-77 

CHAPTER   VI. 

Forms  and  essentials  of  the  pledge.  At  Common  law  the 
contract  may  be  verbal.  In  the  Civil  law,  except  in  com- 
mercial transactions,  the  pledge  must  be  evidenced  by  an 
act  or  deed  in  writing,  stating  the  amount  of  the  debt  and 
describing  the  thing  pledged.  Deliverj-  to  the  pledgee  is 
indispensable.  He  must  receive  and  retain  possession. 
And  his  possession  must  be  ostensible  and  free  from  doubt 
or  ambiguity 79-90 

CHAPTER   VII. 

Pledge   in  form  of  a  sale.     Valid   both  in  the  Common  and 

Civil  'aw,  if  it  contains  all  the  requirements  of  the  pledge.     91-100 

CHAPTER   VIII. 

Contracts  of  securitj'  which  are  neither  pledges  nor  mort- 
gages. Pignorative  transactions  in  which  the  debtor 
makes  a  simulated  sale  of  his  property  to  secure  the  creditor. 
In  the  absence  of  fraud  or  injury  to  third  persons  these 
contracts  have  been  held  valid.  But  they  create  no  right 
of  preference  in  favor  of  the  creditor  101-107 


Table  of  Contexts.  vii 

CHAPTER   IX. 

PAGES. 

Delivery  and  possession  of  the  pledge.  Any  ambiguity  in 
the  character  of  the  pledgee's  possession  may  invalidate 
the  pledge.  Several  instances  of  pledges  set  aside  by  the 
courts  for  that  reason.  Possession  of  the  pledge  may  be 
given  to  a  third  person  for  account  of  the  pledgee.  The 
pledgenr  himself  may  in  some  cases  be  the  detainer  ad  hoc 
for  the  benetit  of  the  pledgee 109-120 

(CHAPTER   X. 

Possession  by  the  pledgee  is  indispensable  for  the  validity  of 
the  pledge,  but  the  possession  may  precede  or  follow  the 
contract.  When  it  follows  it,  the  pledge  attaches  from 
that  moment.  Roman  law  on  that  point.  Substitution  of 
the  thing  pledged  valid.  Delivery  and  possession  of  the 
pledge  may  be  symbolical  or  tietitious.  Possession  of 
goods  in  a  store  valid  by  delivery  of  the  keys  of  the  store. 
This  doctrine  criticised  by  some  writers.  Possession  of 
goods  by  delivery  of  bill  of  lading.  Possession  of  things 
too  bulky  to  be  delivered  corporeally  valid  by  signs  of  pos- 
session    121-132 

CHAPTER   XI. 

Possession  of  incorporeal  things.  Difference  between  the 
Common  law  and  the  Civil  law.  In  the  former  mere  deliv- 
ery of  title  to  creditor  sufticient.  In  the  latter,  notice  of 
the  transfer  of  title  must  be  given  to  the  debtor  of  the  credit 
or  claim.  Rights  or  claims  which  are  not  evidenced  bv 
title  can  not  be  the  subject  of  a  pledge.  Discussion  of 
this  point  between  French  writers.  Sale  of  rights  which 
are  not  evidenced  by  title  valid  as  such.  But  can  such 
sale  validly  cover  the  contract  of  pledge?  Common  law 
and  Civil  law  authorities In8-14S 

CHAPTER    Xn. 

The  possession  of  the  pledgee  being  precarious,  as  he  does 
not  possess  as  owner,  he  can  never,  under  the  Civil  law, 
acquire  the  ownership  of  the  pledge  by  occupation  or 
usncapio  through  the  longest  prescription.  Xor  can  the 
pledgeor  ever  obtain  the  release  of  the  debt  by  the  i»-e- 
scriptio  liberandi  causn ,  as  long  as  the  pledge  remains  in  the 
hands  of  the  pledgee,  because  this  is  a  continuous  acknowl- 
edgment of   the  obligation    which    suspends  the  course  of 


viii  Table  of  Contents. 

FAUES. 

presoription.  Interesting  discussion  of  French  writers 
on  ttiis  point,  when  the  character  of  the  possession  has 
changed  b}'  paj-nient  of  the  debt,  the  pledge  being  still 
left  in  the  hands  o-f  the  pledgee 1 49-154 

CHAPTER    XIII. 

Under  the  Common  law,  the  pledgeor  is  debarred  by  no  length 
of  time  from  the  right  of  demanding  the  return  of  the 
pledge  on  payment  of  the  debt.  And  the  pledgee  never 
acquires  the  ownership  of  the  thing  pledged  except  by 
foreclosure  of  the  pledge.  Yet,  in  direct  contradiction  of 
the  principle,  some  writers,  and  among  them  Judge  Story, 
say  that  after  a  long  lapse  of  time,  if  the  pledgeor  makes 
no  claim  for  redemption,  the  right  will  be  presumed  to  be 
extinguished,  and  the  pledge  will  remain  absolutely  the 
property  of  the  pledgee.  Under  the  Civil  law.  prescription 
is  based  upon  the  presumption  of  payment,  and  therefore 
when  the  debt  is  prescribed  the  pledge  lapses.  Under  the 
Common  law,  it  is  only  the  right  of  action  which  is  barred 
by  limitation,  and  the  debt  remains  alive  after  the  right  to 
sue  is  barred  ]5.")-ltU 

CHAPTER    XIV. 

Rights  and  obligations  of  the  pledgee.  The  act  in  writing, 
which,  under  the  Civil  law.  is  necessary  in  the  contract 
of  pledge,  is  only  intended  to  protect  third  persons. 
Between  the  parties  themselves  the  pledge  is  valid  without 
the  writing.  The  thing  pledged  is  in  the  hands  of  the 
pledgee  on  deposit.  He  has  therefore  no  right  to  use  it. 
under  the  rules  of  the  Civil  law.  In  the  words  of  the 
Roman  law.  Si  creditor  pignore  utatur  farUim  committit. 
Case  of  the  banker  Mires  condemned  to  imprisonment  by 
the  French  Courts  for  wrongfully  disposing  of  the  securi- 
ties pledged  to  him.  Exceptions  to  the  rule  that  the 
pledgee  has  no  right  to  use  the  pledge  ...  l(i.5-17<i 

CHAPTER   XV. 

tSubpledge  or  Repledge  by  Pledgee.  On  principle,  to  sub- 
pledge  or  repledge  is  to  make  use  of  the  pledge,  and  there- 
fore it  is  violative  of  the  contract.  Troplong  favors  the 
repledging  of  goods  in  commercial  transactions.  When  a 
bank  repledges  the  collaterals  in  localities  where  it  is  cus- 
tomary to  do  it.  the  pledgeor  is  presumed  to  have  tacitly 


Table  of  Contents,  ix 

PAGES. 

consented  to  it.  The  custom  in  such  cases  enters  into  the 
contract.  The  Roman  law  allowed  the  pledgee  to  sub- 
pledge  to  his  own  creditor 177-182 

CHAPTER  XVI. 

Right  of  the  pledgee  to  use  the  pledge  under  the  common 
law.  The  law  writers  say  that  the  pledgee  may  use  the 
pledge  if  it  is  not  damaged  thereby.  Source  of  the  common 
law  jurisprudence  on  this  point.  Lord  Holt  held  that  the 
pledgee  could  use  the  pledge  at  his  own  peril.  The  ruling 
repeated  by  Sir  William  Jones  and  Justice  Buller.  Con- 
demnation of  this  reasoning  by  Judge  Story.  Preponder- 
ance of  authorities  in  the  United  States  that  the  pledgee 
may  subpledge  the  collaterals  to  secure  his  own  debt 183-189 

CHAPTER  XVU. 

Tortious  pledge  of  another  person's  property.  In  the  fraud- 
ulent pledge  of  negotiable  paper  by  an  agent  of  the 
owner,  if  the  pledgee  is  in  good  faith  and  without  notice 
of  adverse  rights,  the  defrauded  owner  has  no  recourse 
against  the  pledgee.  For  the  pledge  of  other  property  than 
negotiable  paper,  the  law  of  England,  the  United  States 
and  Louisiana  protects  the  true  owner  against  the  pledgee 
in  good  faith,  under  the  rule  that  nobody  can  transfer  a 
right  which  he  himself  does  not  own.  But  in  France  and 
other  continental  countries  in  Europe,  which  followed  its 
legislation,  the  possession  of  movable  or  personal  property 
is  equivalent  to  title,  and,  therefoi'e,  the  pledgee  in  good 
faith  is  protected  against  the  true  owner  of  property 
pledged  by  an  unauthorized  pledgeor 191-19i> 

CHAPTER   XVIII. 

Right  of  pledgeor  to  demand  the  return  of  the  pledge  on 
account  of  unauthorized  use  of  the  same;  the  rule  is 
based  upon  the  principles  of  the  law  of  contract.  English 
decisions  opposed  to  it.  Even  when  the  pledgee  has  made 
an  improper  and  wrongful  use  of  the  pledge,  the  pledgeor 
is  relegated  to  an  action  for  damages  under  the  authority 
of  the  English  cases.  This  is  a  clear  departure  from  the 
principles  of  the  contract  of  pledge 197-206 

CHAPTER   XIX. 

Right  of  other  creditoi's  of  the  pledgeor  to  seize  the  pledge. 
In  the  Civil  law  the  right  of  retention  of  the  pledge  spring- 


X  Table  of  Contents. 

PAGES. 

ing  from  the  law  and  the  contract,  only  affects  the 
pledgeor.  Against  him  the  pledgee  may  retain  the 
pledge  until  it  is  foreclosed.  But  neither  the  law  nor  the 
contract  prevent  third  persons  from  seizing  the  pledge  in 
the  hands  of  the  pledgee,  if  the  value  of  the  thing  pledged 
exceeds  the  debt,  and  the  rights  of  preference  of  the 
pledgee  may  be  protected  in  the  seizure  and  sale  of  the 
pledge. 

At  Common  law  the  other  creditors  of  the  pledgeor  can  not 
seize  or  attach  the  pledge  as  long  as  it  is  unforeclosed  in 
the  hands  of  the  pledgee.  The  right  of  retention  of  the 
latter  is  absolute.  In  some  States  of  the  Union  the  Com- 
mon law  has  been  amended  by  statute  and  the  pledge  may 
be  attached  in  those  States,  subject  to  the  lien  of  the 
pledgee. 

The  pledgee  is  not  bound  to  surrender  the  pledge  to  the  as- 
signee of  the  pledgeor.  Jurisprudence  of  the  Supreme 
Court  of  the  United  States;  Jurisprudence  of  Louisiana 207-211 

CHAPTER    XX. 

The  pledgee  must  take  proper  care  of  the  pledge.  He  is  not 
responsible  for  the  lUjht  fmtlt.  His  care  must  be  the  same 
that  he  would  take  of  his  own  property.  He  is  entitled  to 
the  expenses  incurred  in  preserving  the  pledge  and  has  a 
lien  for  those  expenses. 

In  the  Civil  law  the  pledgee  has  the  right  to  demand  a  new 
pledge  if  the  first  is  insufficient,  or  the  immediate  payment 
of  the  debt,  even  if  the  latter  is  not  yet  due.  Not  so  in  the 
Common  law;  there,  the  pledgee  caa  only  demand  the 
rescission  of  the  contract,  and  damages  if  he  suffers  any 223-234 

CHAPTER    XXI. 

The  power  of  attorney  to  sell  the  pledge  is  not  revoked  by 
the  bankruptcy  or  death  of  the  pledgeor.  Doctrine  of  the 
power  of  attorney,  coupled  with  an  intex'est  of  the  Common 
law.  Procurator  in  rem  suam,  of  the  Civil  law.  What  inter- 
est, with  which  the  power  of  attorney  is  coupled,  will  pre- 
vent the  revocation.  The  interest  must  be  in  the  subject 
itself.  Case  of  Hunt  vs.  Rousmanier's  Administrators. 
Authority  of  Chief  Justice  Marshall.  In  the  Civil  law  the 
rule  is  absolute.  No  distinction  is  made  between  the 
interest  in  the  subject  and  the  interest  in  the  proceeds 235-243 


Table  of  Contents.  xi 

CHAPTER   XXII. 

PAGES. 

The  pledge  is  indivisible.  Every  portion  of  the  thing 
pledged  secures  every  part  of  the  debt.  The  principle  is 
of  the  nature  of  the  contract  of  pledge,  but  not  of  its 
essence.  The  parties  may,  by  agreement,  render  the 
pledge  divisible.  The  consequence  of  the  indivisibility  of 
pledge  is  that,  in  case  of  death  of  the  pledgeor,  if  one  of  his 
heirs  pay  his  share  of  the  debt,  he  can  not  demand  the 
release  of  the  pledge  for  the  amount  paid 245-24H 

CHAPTER    XXni. 

What  debt  is  secured  by  the  pledge.  In  default  of  an  agree- 
ment to  the  contrary.  The  pledge  only  secures  the  debt  for 
which  it  is  given.  The  retention  of  the  pledge  by  the 
pledgee  after  payment  of  the  debt  is  wrongful  and  entitles 
the  pledgeor  to  an  action  for  damages.  In  France  and  other 
countries  of  the  Civil  law,  the  pledge  secures,  in  default  of 
an  agreement  to  the  contrary,  the  other  debts  of  the 
pledgeor  to  the  pledgee,  provided  they  are  contracted  pos- 
teriorly to  the  pledge  and  are  due  before  the  debt  origi- 
nally pledged.     Roman  law  on  this  point 247-2.51 

CHAPTER   XXIV. 

The  pledgee  can  not  by  previous  agreement  appropriate  the 
pledge  to  himself,  in  default  of  payment.  Both  the  Com- 
mon and  the  Civil  law  forbid  it.  The  Lex  Commissoria  of 
the  Roman  law.  Intended  to  protect  the  debtor  against 
the  greed  of  the  creditor.  But,  after  the  debt  has  become 
due,  the  debtor  can  transfer  the  thing  pledged  to  the  credi- 
tor in  payment  2o3-2(iO 

CHAPTER   XXV. 

Right  of  the  pledgee  to  have  the  pledge  sold.  By  agreement, 
the  pledge  may  be  sold  without  the  intervention  of  the 
courts,  at  private  sale,  by  the  pledgee  himself,  on  the 
terms  and  conditions  fixed  in  the  contract.  Error  of  Mr. 
Jones  and  Mr.  Edwards  in  regard  to  the  sale  of  the  pledge 
in  Louisiana 2Gl-2(i.") 

CHAPTER   XXVI. 

Right  of  the  pledgee  to  buy  the  pledge.  The  parties  may 
agree  that  in  default  of  payment,  the  pledgee  will  have  the 
right  to  cause  the  thing  pledged  to  be  sold   at  public  or 


xii  Table  of  Contents. 

PAGES. 

private  sale,  with  or  without  notice,  through  an  agent,  or  bv 
the  pledgee  himself,  and  that  he  may  himself  buy  it.  All 
such  agi'eements  are  valid  and  are  now  in  daily  practice 267-2(i9 

CHAPTER   XXYII. 

Commercial  Pledges.  Even  under  the  Civil  law,  the  written 
act  or  deed  of  pledge  is  not  necessary  in  commercial 
pledges.  Delivery  of  negotiable  paper  payable  to  bearer, 
or  endorsed  if  payable  to  endorser,  constitutes  the  pledge 
of  it.  The  pledgee  of  negotiable  paper  without  notice  is  a 
holder  for  value.  Even  the  pledge  of  such  paper  by  a 
factor  without  authority  is  valid.  The  law  merchant  pre- 
vails in  such  cases 271-282 

CHAPTER  XXVIIl. 

Comnieicial  pledges  under  the  law  of  France  and  other 
countries  of  the  Civil  law.  No  writing  necessary.  Xo 
foreclosure  of  the  pledge  other  than  the  sale  of  the  thing 
after  eight  days  to  the  debtor.  Article  of  the  Code  of 
Commerce  of  the  German  Empire  protects  the  pledgee  in 
good  faith  even  against  the  true  owner.  The  Code  of 
Commerce  of  the  Netherlands  does  the  same  thing 283-289 

CHAPTER    XXIX. 

Pledges  of  bills  of  lading.  It  is  more  properly  the  merchan- 
dise which  is  pledged  by  the  pledge  of  the  bill  of  lading. 
Possession  of  the  goods  is  given  to  the  pledgee  by  tx'ansfer 
of  the  bill  of  lading.  The  common  carrier  holds  the 
goods  for  account  of  whomever  is  the  transferee  of 
the  bill  of  lading.  His  possession  is  that  of  such  trans- 
feree. Yet  the  latter  is  only  the  ap-parent  owner  of  the 
goods  when  he  is  a  pledgee.  Erroneous  expressions  of 
certain  decisions  of  the  Supreme  Court  of  the  United 
States  which  speak  of  the  o-wnership  of  the  pledgee  of 
bills  of  lading.  Bills  of  lading  in  this  country,  except  in 
the  State  of  Maryland,  are  only  </«asj'-negotiable  instru- 
ments. The  assignee  of  them  has  only  the  rights  which 
the  assignor  had.  Attempts  in  some  States  to  make  bills 
of  lading  fully  negotiable  nullified  by  the  courts 291-313 

"  CHAPTER  XXX. 

Bills  of  Lading  under  the  Civil  law.  In  France  and  the  coun- 
tries of  Europe  which  followed  her  legislation,  the  holder 


Table  of  Contexts.  xiii 

PAGES. 

in  good  faith  of  a  bill  of  lading  is  entitled  to  tlie  goods 
again<t  the  ti-ue  owner,  even  if  the  bill  of  lading  has  been 
fraudulently  transferred.  The  bill  of  lading  has,  therefore, 
in  those  countries  the  elements  of  full  negotiabilitj-.  The 
principle  was  first  based  upon  the  necessities  of  com- 
merce, and  was  recognized  and  enforced  in  the  early 
days  of  Italian  jurisprudence.     Casaregis  and  Deluca 315-319 

CHAPTER  XXXI. 

A  bill  of  lading  is  at  the  same  time  a  receipt  for  the  goods  and 
a  contract  to  carry  them,  The  contract  is  entered  into  at 
the  place  where  the  bill  is  drawn,  and  it  is  executed  at  the 
place  where  the  goods  are  delivered.  When  the  lex  loci 
contractus  is  not  the  same  as  the  lex  loci  solutionis,  which  is 
to  govern  in  cases  of  bills  of  lading?  Doctrine  of  the  lex 
loci  sohitionis  under  both  the  Common  law  and  Civil  author- 
ities   321-337 

CHAPTER  XXXII. 

Pledge  of  warehouse  receipts.  Like  the  bill  of  lading  the 
warehouse  receipt  is  a  muniment  of  title.  The  holder 
of  it  is  eiititled  to  the  possession  of  the  goods,  and  the 
warehouseman  holds  them  vicariously  for  him.  The  two 
subjects  are  to  some  extent  governed  by  the  same  prin- 
ciples. Warehouse  receipts  are  also  5««si-negotiable. 
The  pledge  of  the  receipt  is  the  pledge  of  the  goods.  The 
assignee  or  transferee  of  it  has  the  same  rights  that  the 
assignor  or  transferror  bad.  Such  is  tae  law  in  the  United 
States,  except  in  the  State  of  Maryland,  where  the  bona  fide 
holder  of  a  warehouse  receipt  is  protected  against  the  true 
owner,  even  if  the  receipt  was  fraudulently  transferred. 
Law  of  Louisiana.  Law  of  Xew  York.    Indicia  of  ownership  339-359 

CHAPTER   XXXIII. 

Law  of  France  for  warehouse  receipts 361-363 

CHAPTER    XXXIV. 

Pledge  of  corporate  stock.  Both  under  the  Common  law  and 
the  Civil  law  corporate  stock  may  be  pledged.  It  was  a 
subject  of  doubt  for  a  long  time  whether  that  kind  of  prop- 
erty could  legally  be  pledged.  Is  the  mere  delivery  of  the 
certificate  of  shares  sufijcient  to  constitute  a  pledge  of  the 
stocky    It  is  so  in  jjouisiana  by  statute.     It  seems  to  be  the 


xiv  Table  of  Contents. 

PAGES. 

general  opinion  that  in  the  other  States  there  must  be  a 
written  transfer  of  the  stock  to  the  pledgee.  The  transferee, 
in  such  ease,  if  the  transfer  is  made  on  the  books  of  the  cor- 
poration, is  liable  in  the  same  manner  as  a  stockholder. 
Such  is  the  case  with  pledgees  of  stock  of  the  national 
banks.  Recent  decisions  of  the  Supreme  Court  of  the 
United  States  showing  how  such  liability  may  be  avoided 
by  pledgees .3(i5-ii79 

CHAPTER  XXXV. 

Pledgee  of  corporate  stock  entitled  to  the  dividends,  but  he 
must  account  for  them;  they  reduce  the  debt  protanto. 
Pledgee  of  stocks  not  obliged  to  return  the  same  specific 
shares ;  he  may  deliver  to  the  pledgeor  instead,  stocks  of  the 
same  kind  and  value.  Such  is  the  jurisprudence  in  this 
country  and  in  England.  It  is  clearly  a  departure  from  the 
true  principles  of  the  contract  of  pledge.  The  agreement 
between  the  parties  that  the  pledgee  may  return  something 
equivalent  to  the  pledge,  but  not  the  specific  thing  pledged, 
is  valid  according  to  the  Civilians,  but  the  contract  in  that 
case  is  not  that  of  the  pledge  properly  speaking .      :-^81-:-iS7 

CHAPTER   XXXVI. 

Pledges  of  policies  of  insurance.  A  policy  of  insurance  being 
a  chose  in  action  may  be  pledged  at  Common  law  by  mere 
delivery  to  the  pledgee ;  but  only  so  when  it  is  payable  to 
the  person  named  in  the  policy.  Under  the  Civil  law.  as 
the  pledge  must  be  evidenced  by  an  act  in  writing,  stating 
the  amount  of  the  debt  secured,  is  the  simple  endorsement 
and  delivery  sufficient?  The  pledge  by  transfer  of  the 
policy  is  not  binding  on  the  insurer;  but,  in  such  case,  it  is 
the  transfer  which  is  not  valid  without  the  consent  of  the 
insurer,  not  the  pledge 389-895 

CHAPTER   XXXVII. 

Pledge  of  policies  of  insurance  to  a  person  who  has  no  inter- 
est in  the  life  of  the  insured.  Early  days  of  life  insurance. 
The  principle  is  settled  that  no  policy  can  originally  issue 
to  a  person  who  has  no  interest  in  the  life  of  the  insured. 
Bat  after  being  validly  issued  to  one  having  the  required 
interest,  can  it  be  transferred  to  one  having  no  interesty  The 
United  States  Supreme  Court  has  decided  that  such  trans- 
fer is  invalid.    The  jurisprudence  of   rhe   State   of  Xew 


Table  op  Contents.  xv 

-tr       1     •  1  ■  rn  PAGES. 

\  ork  IS  Otherwise.  The  principle  underlying  this  question 
is  whether  the  life  insurance  is  a  contract  of  indemnity,  or 
a  mere  contract  to  pay  a  sum  of  money  in  consideration  of 
the  premiums,  af  the  death  of  the  insured.  Jurisprudence 
of  England  settled  in  the  latter  sense.  Recognition  of  the 
same  doctrine  in  France 897-408 

CHAPTER   XXXVni. 

Under  the  rule  established  by  the  Supreme  Court  of  the 
United  States,  that  the  pledgee  of  a  policy  of  life  insurance 
has  an  interest  in  the  life  of  the  insured  only  to  the  extent 
of  his  debt,  he  is  obliged  to  return  to  the  pledgeor  the  excess 
of  insurance  money  recovered  under  the  policy.  But  when 
the  creditor  himself  has  insured  the  life  of  his  debtor,  for 
his  own  account,  and  has  paid  the  premiums  out  of  his  own 
funds,  is  he  entitled  to  the  whole  amount  of  the  policy  if  it 
exceeds  the  debt?    Decided  in  the  afiirmative  in  France 409^11 

CHAPTER  XXXIX. 

Pledge  of  Margins.  The  Common  law  jurisprudence  has  estab- 
lished the  rule  that  when  a  broker  purchases  stocks  or 
goods  for  account  of  a  customer,  who  deposits  a  margin 
with  him,  as  security,  the  contract  of  pledge  takes  place 
tacitly  between  them.  The  margin  deposited  constitutes 
the  pledge,  as  well  as  the  shares  of  stock  and  the  goods,  if 
the  same  are  delivered  by  the  seller  to  the  broker.  The 
implication  of  the  understanding  of  the  contracting  parties 
arises  from  the  custom  of  the  locality.  The  Court  of  Xew 
York  has  been  prominent  in  establishing  this  jurispru- 
dence    413-422 

(CHAPTER   XL. 

The  doctrine  of  the  implied  contract  of  pledge  between  the 
broker  and  his  customer  in  the  purchase  of  slocks  or 
goods  which  the  former  carries  for  the  latter,  was  adopted 
by  the  court  of  Connecticut  and  carried  farther  than  it 
was  by  the  court  of  New  York.  In  the  Connecticut  cases 
it  was  held  that  the  broker  was  not  under  any  obligation  of 
keeping  the  identical  stocks  purchased  for  the  customer, 
and  that,  provided  he  was  ready  to  deliver  stocks  of  the 
same  kind  to  the  customer  at  the  redemption  of  the 
pledge,  his  duties  as  pledgee  were  not  violated.  The 
iionvt  of  Massachusetts  refused  to  recognize  this  doctrine....  42;-5-431 


xvi  Table  of  Contents. 

CHAPTEK    XLI. 

PAGES. 

Pledge?  by  factors.  At  Common  law  the  rule  is  that  a 
factor  to  whom  property  is  consigned  for  sale  has  no  au- 
thority to  pledge  it.  In  the  early  part  of  the  present 
century,  the  rule  was  changed  in  England  by  statute.  The 
necessities  of  commerce  demanded  it.  English  Factors* 
Acts.  The  titate  of  Xew  York  soon  followed  the  example 
of  England,  and  in  1830,  its  Factor's  Act  was  passed. 
This  law  did  not  afford  complete  security  to  the  pledgee. 
The  State  of  Massachusetts  took  a  more  decided  position 
on  this  subject  by  its  legislation.  Efforts  of  the  Legislature 
in  Louisiana  to  protect  the  pledgee  in  transactions  with 
factors  .433-447 

CHAPTER   XLn. 

In  the  Civil  law  no  distinction  is  made  in  pledges  of  factors, 
depositories,  common  carriers,  or  other  possessions  of  per- 
sonal or  movable  property  generally.  Such  was  the  .rule 
of  the  old  commercial  law  in  some  countries  of  Europe 
during  the  middle  ages.  Casaregis  and  Cardinal  Deluca 
quoted.  Troplong  on  the  same  subject.  French  Code  of 
Commerce.  Tendency  of  the  Common  law  to  protect  the 
true  owner  against  the  pledgee  in  good  faith.  Opposite 
doctrine  of  the  Ci\il  law.  to  protect  the  pledgee  in  good 
faith  against  the  true  owner.  Pledge  by  factors  of  negoti- 
able paper  valid  against  the  owner.     Indicia  of  ownership.  449-464 

CHAPTER    XLllI. 

Liens  at  Common  law  and  Tacit  pledges  of  the  Civil  law.  Sim- 
ilarity of  the  two  subjects.  In  both  cases  the  right  of  pref- 
erence and  priority  of  the  creditor  rests  upon  possession. 
The  denomination  of  tacit  pledge  hardly  a  correct  one. 
The  pledge  is  necessarily  contractual.  Privilegia  of  the 
Roman  law.  Explanation  of  statutory  pledge.  Lien  at  law 
and  tacit  pledge  of  the  lessor,  the  artisan,  the  inn-keeper, 
the  common  carrier,  etc.  The  lien  resulting  from  judicial 
seizure.     Pignns  coactiviim  of  the  Roman  law 465-477 

CHAPTER   XLIV. 

Lien  from  seizure  under  the  Common  law.  Difference  be- 
tween the  Civil  and  the  Common  in  respect  to  notice  of 
seizure  to  debtor  of  the  credit  seizure.  Su«h  notice  indis- 
pensable in  the  Civil  law  to  create  the  lien.     In  the  Com- 


Table  of  Contents.  xvii 

I'AliES. 

nion  law  the  lien  arises  from  the  seizure  independently  of 
the  notice.  Origin  of  the  word  lien.  Right  of  retention 
of  the  lessee's  property  for  the  rent.  Distress  at  Common 
law.    Exemptions  from  seizure  for  rent 479-490 

CHAPTER   XLV. 

Equitable  liens  of  the  Common  law.  Privileges  of  the  Civil 
law.  Similarity  of  the  two  subjects.  In  both  cases  the 
creditor  has  a  right  of  preference  and  priority  over  the 
proceeds  of  the  property ;  but  in  neither  case  is  he  put  in  pos- 
session of  it.  The  equitable  lien  is  derived  from  the  hypoth- 
cca  of  the  Romans.  The  pignux  and  the  fidncia.  In  both 
of  these  contracts  of  security  the  creditor  was  in  possession 
of  the  property,  and  the  debtor  suffered  in  consequence 
from  the  deprivation  of  il  and  the  neglect  or  mismanage- 
ment of  it  by  the  creditor.  This  was  remedied  by  the 
hypothem.  Mature  of  the  equitable  liens.  Recent  decisions 
of  the  Supreme  Court  of  the  United  States 49I-.W2 

CHAPTER   XLVI. 

Continuation  of  the  subject  of  Equitable  Liens,  Professor 
Pomroy.  Privile<na  of  the  Roman  law,  Domat.  Code 
Napoleon  and  Civil  Code  of  Louisiana  provide  for  Privi- 
leges; they  are  of  strict  law  and  interpretation.  Decisions 
in  Louisiana.  Difficulties  of  the  vital  question  in  that  State 
when  equitable  liens  are  claimed  in  the  Federal  courts. 
Can  they  be  recognized  and  enforced  within  the  territory 
of  a  State  of  which  the  municipal  law  forbids  them?  The 
Supreme  Court  of  the  United  States,  and  the  Court  of  Ap- 
peals abstained  from  deciding  the  question .503-517 

CHAPTER   XLVn. 

Although  the  doctrine  qi  Equity  is  not  systematized  in  Lou- 
isiana as  it  is  in  England  and  in  the  States  of  the  Com- 
mon law,  yet  it  is  recognized  and  applied  in  that  SSate. 
Its  peculiar  admixtion  of  law  and  equity  has  been  well 
stated  and  explained  by  Mr.  Hennen  in  his  Digest.  Re- 
marks of  Merlin  and  of  Chief  Justice  Hale  on  Equity .519-527 


LIST  OF  AUTHORS  CITED. 


COMMON    LAW. 

Addison  on  Contracts. 
Benjamin  on  Sales. 
Brandt  on  Suretyship. 
Burge  on  Suretyship. 
Chitty  on  Contracts. 
Colebrookon  Collateral  Soouriiies. 
Cook  on  Stock  and  Stockholders. 
Dicey,  Conflict  of  Laws. 
Dos  Pasos  on  Stock  Brokers. 
Drake  on  Attachment. 
Edwards  on  Bailments. 
Fonblanque,  Equitj^ 
Jones  on  Mortgages. 
Jones  on  Pledges. 
Joyce  on  Insurance. 
Kent  Commentaries. 
Lowton  on  Bailments. 

Marksby,  Elements  of  Law. 

May  on  Insurance. 

Mechem  on  Agency. 

Overton  on  Liens. 

Parsons  on  Contracts. 

Pomeroy,   Equity  Jurisprudence. 

Porter  on  Bills  of  Lading. 

Schouler  on  Bailments. 

Story  on  Agency. 

Story  on  Bailments. 

Story  on  Conflict  of  Laws. 

Story  on  Contracts. 

Story,  Equity  .Jurisprudence. 

Tiedeman  on  Mortgages. 

"Waterman  on  Corporations. 

Wharton  on  Conflict  of  Laws, 

Wharton  on  Contracts. 

CIVIL  LAW. 

Aubry  et  Kau.  Droit  Civil. 
Baudry-Lacantinerie,    Du      Xan- 
tissement. 


Baudry-Lacantinerie,  Des  Privi- 
leges et  Hypotheques. 

Casaregis,  De  Credito. 

Colmet  de  Santerre,  Commen- 
taries. 

Demolombe,  Des  Biens. 

De  St.  Joseph,  Concordance  des 
Codes  Civils. 

Domat.  Des  Gages. 

Domat,  Des  Prescription. 

Ducaurroy,  Instituts  Expliques. 

Duranton,  Droit  Civil. 

Fuzier-Herman,  Code  Civil. 

Goirand,  French  Code  of  Com- 
merce. 

Granger,  Des  Hypotheques. 

Larombiere,  Des  Obligations. 
Laurent,  Du  Gage. 
Laurent,  Des  Obligations. 
Laurent,  De  la  Prescription. 
Locre,  Vol.  VUI,  p.  106. 

Marcade  De  la  Prescription. 
Marcade,  De  la  Vente. 
Merlin,  Repertoire. 
Montesquieu,  Esprit  des  Lois. 
Mourlon,  Examen  Critique. 
Ortolan,  Instituts. 
Pont,  Du  Nantissement. 
Pont,  Des  Privileges. 
Pothier,  Du  Nantissement. 
Pothier,  Des  Obligations. 
Pothier,  Pandectes. 
Pothier,  De  la  Possession. 
Pothier,  Du  Louage. 
Pothier,  De  la  Vente. 
Kogron,  Code  Civil  Explique. 
Savigny,  Droit  Romain. 
Toullier,  Droit  Civil. 
Troplong,  Du  Cautionnement. 
Troplong,  Du  Nantissement. 
Troplong  De  la  Prescription. 
Troplong,  De  la  Privileges. 
Troplong,  De  la  Vente. 


TABLE  OF  CASES  CITED. 


j^ 


PAGE 

Abbott  VS.  Goodwin 120 

Adams  vs.  Bowerman 461 

Adams,  Joy  vs 158 

Adams  vs.  Sturges 248 

Adams,  Vermilye  vs 195,  280 

Agnew  vs.  Johnson 195 

Albert,  Matthews  vs 373 

Allen,  Bush  &  West  vs.  Nettles 

243,  237,  97 

Allen,  Mutual  Company  vs 406 

Allen  vs.  Smith 120 

Allen  vs.  St.  Louis  Bank 

436,  437,  439,  446 
Am.  D.  &  T.  Co.,  Corn  Exchange 
Bank  vs 341 


PAGE 

Am.  D.  &  T.  Co.,   Hanover  Bank 

vs 341 

Anderson,  Thibodaux  vs 99 

Anderson  vs.  Warehouse  Co 372 

Andrews  vs.  Pond 321 

Antoine  vs.  Smith 71 

Argote's  Succession 55 

Arick  vs.  Walsh 488 

Armstrong,  Cammack  vs 401 

Arnold  vs.  Brown 479 

Association  Co.,  City  Bank  vs 390 

Auje  vs.  Variol 210 

Austin,  Howe  vs 99 

Ayres  &  Reed  Co.  vs.  Dor?ey  Co.. 300 


Bagley  vs.  Sheriff 246 

Bain  vs.  Brown 268 

Baker  vs.  Drake 127 

Baker  vs.  Drake  et  al 425 

Baker,  Merrifield  vs 390 

Baker,  IS'eevins  vs 389 

Baker  vs.  Smith 106 

Baldwin  vs.  Bradley 249,  246 

Baldwin  vs.  Ely 461 

Bank,  Burnap  vs 248 

Bank  vs.  Dean  et  al 341 

Bank,  Deering  vs 390 

Bank,  Emery  vs 296 

Bank  vs.  Fisher 296 

Bank  vs.  Galley 341 

Bank,  Givanovich  vs 280,  349,  461 

Bank  vs.  Hanson 248 

Bank  vs.  Harkness 120 

Bank  vs.  Harris 248 

Bank  vs.  Hingham  Co 373 

Bank,  Holmes  vs 296 

Bank  vs.  Janin 110,  98 

Bank  vs.  Kelly 296 

Bank  vs.  Knapp 154,  26 


Bank  vs.  Laird 246 

Bank,  Latham  vs 390 

Bank  vs.  Loeb 249,  248 

Bank  vs.  Logan 296 

Bank,  Loyd  vs 248 

Bank  vs.  Marshall 82 

Bank,  Means  vs 300 

Bank  vs.  Meyer 296 

Bank  vs.  Maureau  et  als 510 

Bank  vs.  Moreau 507 

Bank  vs.  Nomeyer 296 

Bank,  Gates  vs 280 

Bank,  Railroad  Co.  vs 280 

Bank  of  Randall,  Means  vs 47,  13 

Bank,  Rowan  vs 231 

Bank,  Saloy  vs 349,  461 

Bank,  Searight  vs 248 

Bank,  Soule  vs 390 

Bank,  State  vs 482,507,  510 

Bank,  Stern  vs 280 

Bank,  Stern  Bros,  vs 191 

Bank,  Thompson  vs 383 

Bank  vs.  Vanderhorst 282,  274 

Bank  vs.  Wiltz 248 


XXll 


Table  of  Cases  Cited. 


PAGE 

Banking  Co.,  Lewis  vs 300 

Banking  Co.,  Woolly  vs 248 

Bannen,  Wilson  vs 154 

Barber,  Starret  vs 231 

Barker,  Delauney  vs 435 

Barnard  vs.  Campbell 461 

Barton,  Roscarrick  vs 556 

Batner,  Herrins  vs 395 

Bauze,  Senecal  vs 249 

Baxter,  Parker  vs 461 

Bay,  Codington  vs 280 

Bayard,  llomero  vs 249 

Beck  &  Co.  vs  Brady  et  al 477 

Beer,  Gunibel  vs 296 

Belknap  vs.  Gleason 158 

Beltran  &  Co.,  Webre  Syndic  vs.. .509 

Benjamin,  Succession  of 513 

Bennett,  Geddes  vs 118 

Bernard,  Coggs  vs 206,  186 

Best,  Waller  vs 479 

Billet  vs.  Woods 248 

Bird  vs.  Cockren 191,  280 

Blanc  vs.  Herzog 154,    26 

Blanchard,  Landry  vs 507 

Blanchard,  White  vs 210 

Blevins,  Farmers'  Bank  vs 341 

Bodley,  Goodrich  vs 470 

Boldero,  Godsall  vs 406 

Bombach  vs.  Insurance  Co 401 

Boone,  Wallis  vs 210 

Bossiere,  Kennedy  vs 70 

Bouchereau,  LeBlanc  vs 106 

Bowerman,  Adams  vs 461 

Bowers,  Taylor  vs 77 


FA.GE 

Bowman,  Dewey  vs 59 

Bovce.  National  Bank  vs 341 

Boyd  vs.  Chaffe 71 

Boyd,  Uardin  vs ,158 

Boynton  vs.  Payroux 127 

Bovson  AS.  Coles 435 

Bradley,  Baldwin  vs 249,  246 

Bradley,  Lee  vs 133 

Brady  et  al.,  Beck  &  Co.  vs 477 

Breaux,  Jauresvs 210 

Brewster  vs.  Hartley 148 

Brockway  vs.  Express  Co 324 

Brother  vs.  Saul 215 

Brown,  Arnold  vs 479 

Brown,  Bain  vs 268 

Brown,  Finn  vs 372 

Brown  vs.  Ins.  Co 161 

Brown,  Walker  vs 497 

Brownrigg,  Navulshaw  vs 437 

Bruce  vs.  Forbes 390 

Bry,  Hanna  vs 31 

Bryant,  State  Bank  vs 341 

Buckley,  Hanchetfc  vs 341 

Building  Association  vs.   Fergu- 
son   282 

Bullard,  Gause  vs 482 

Burdon  Sugar  Ketining  Co.    vs. 

Pavne 517 

Burdrich  et  als.,  Seewall  vs  ...300,  296 

Burgess  vs.  Seligman 374 

Burham  vs.  C.  V.  S.  Co :..341,  387 

Burke,  Forbes  vs 55 

Burnap  vs.  Bank 248 

Burnes,  Greenbaum  vs 341 


o 


C.  V.  S.  Co.,  Burham  vs 341,  387 

Caffin  vs.  Kirwan 57 

Cammack  vs.  Armstrong 401 

Campbell,  Bernard  vs 461 

Campbell  vs.  Slidell 215 

Capel,  Cooper  vs 488 

Caperton  vs.  McComick 120 

Carraby,  Gravier  vs 71 

Carriere,  Tua  vs 477 

Carter  vs.  Merrill  &  Co 341,  357 

Cartwrightvs.  Wilmerdin..439,  S5S,  355 

Case,  Henderson  vs 191 

Case  vs.  Kloppenburg .<»487 

Case,  National  Bank  vs 370 

Casey  vs.  Cavaroc..516, 220, 113,  97. 

95,  80,  15 

Casey  vs.  Credit  Mobilier 216 

Casey,  Martin  vs 507 


Cavaroc,  Casey  vs..516,  220, 113,  97, 

95,  80  15 

Cerf,  Windham  vs 71 

Cassation,  Court  of 318,  297,  93,  54 

Chaffe,  Boydvs 71 

Chaffe  &  Sons  vs,  DuBose 175 

Chapman  vs.  Mclllrath 390 

Cliester,  Taylor  vs 73 

Chicago  Dock  Co.  vs.  Foster 358 

Citizens  Bank  of    La.  vs.  Cotton 

Press  Co 468 

Citizens  Bank  of  La.  vs.  Heirs  of 

Gray 468 

Citizens  Bank  vs.  Maureau 482 

City  Bank  vs.  Ass.  Co 390 

Clark,  France  vs 383 

Clark  et  al.,  Hubert  vs 26 

•Clark,  Hulbert  vs 158 


Table  op  Cases  Cited. 


XXlll 


PAGE 

Clark,  McCalla  vs 231 

Clark  vs.  Iselin 95 

Cochran  &  Co.  vs.  Walker 507 

Cockren,  Bird  vs 191,  280 

Codington  vs.  Bay 280 

Coevdrey  vs.  Vandenberg 280 

Coggsvs.  Bernard 206,  186 

Coldeleugh  vs.  Johnson 158 

Coles,  Boyson  vs 435 

Coles,  Martini  vs 300,  435 

Colgate  &  Co.  vs.  Penn  &  Co..300,  29S 

Collins  vs.  Dauley 390 

Collins  vs.  Pellerin 106 

Collins  vs.  Kalli 357 

Combs  vs.  Tutchett 120 

Commercial  Bank  vs.  Hunt 341 

Comstock  vs.  Hier 280 

Conger  vs.  Xew  Orleans 154,  26 

Corn  Exchange  Bank  vs.  Am.  D. 

&  T.  Co 341 

Conner  vs.  Creyham 313 

Conner  vs.  Hile 313 

Connors,  Watts  vs 320 

Conrad  vs.  Fisher 341 

Consolidated  Association,  Forstall 

vs 468 

Cook  vs.  Tullis 216 

Cooper  vs.  Capel 488 

Cooper  vs.  Roy 206 


PAGE 

Corcoran,  Hall  vs 73 

Corlet  vs.  Underwood 431 

Corning,  Porter  vs 215 

Cosgrove,  Lawler  &  Hugh  vs 106 

Cotton  Press  Company,   Citizens 

Bank  vs 468 

Cotton  Press  Company,  St.  Romes 

vs 31 

County  vs.  Huchburger 248 

Court  of  Cassation 318,  297,  93,  54 

Cox  vs.  United  States 326,  321 

Crain  vs.  Paine 390 

Credit  Lyonnais,  Jacobi  vs 324 

Credit  Mobilier,  Casey  vs 216 

Creditors,  Delogny  vs 511 

Creditors,  Fields  vs 484 

Creditors,  Hanna  vs 477 

Creditors,  Jacquet  vs 237,  117 

Creditors,  Lallande  vs 298,  442 

Creditors,  Levert  vs 71 

Creditors,  Marsin  vs 84 

Creditors,  Martin  vs 341 

Creditors,  Renshaw  vs 262,  237,  97 

Creyham,  Conner  vs 313 

Crouley  vs.  Insurance  Co 390 

Crowley  vs.  Savings  Bank  461 

Currier  vs.  Howard 390 

Cutter,  Rice  vs 312 


ID 


Dalby  vs.  India  and  London  Life 

Insurance  Co 407 

Daniels,  Thayer  vs 32 

Daubigny  vs.  Duval 435 

Dauley,  Collins  vs 390 

Davies,  McCombic  vs 435 

Davis  vs.  Holbrook 71 

Davis,  Peugh  vs 260 

Davis,  Stewart  vs 73 

Davis,   Warnock  vs 401 

Daws  vs.  Kidder 313 

Dean  et  al..  Bank  vs 341 

Dean  vs.  Martin 71 

Dearborn,  Tucker  vs 296 

Deblieux   et   al..   Mineral    Water 

Company  vs 379 

DeBlois  vs.  Reiss 85 

Deering  vs.  Bank 390 

Delauney  vs.  Barker 435 

Delaware,  The  321 

Delgadovs.  Wilbur 305,  296 

Delogny  vs.  Creditors 511 


Deloach  vs.  Jones 133 

Delop  &  Co.  vs.  Windsor  &  Ran- 

doph  98 

D'Meza's  Succession 48 

Dewey  vs.  Bowman 59 

Dillon  vs.  Poirier 488 

Ditson  vs.  Randall 358 

Dixon  vs.  National  Life  Ins.  Co.. .405 

Dolhonde's  Succession 175 

Dolliver,  Thompson  vs 47,  12 

Donaldson  vs.  Fan-ell 213 

Donald  vs.  Suckling 205,  203,  188 

Dorsey  Co.,  Ayres&  Reed  Co.  vs.  300 

Drake,  Baker  vs 127 

Drake  et  a!..  Baker  vs 425 

Drake,  Stewart  vs 385 

Dreyfus,  Freiburg  vs 88 

Dry  Dock  Co.,  Insurance  Co.  vs... .378 

DuBose,  Chaffe  &  Sons  vs 175 

Ducasse  vs.  McKenna 175 

Dunlap,  Pepper  vs 240 

Duval,  Daubigny  vs 435 


XXIV 


Table  of  Cases  Cited. 


E 


PAGE 

Eckel  vs.  Reros 405 

Edson  vs.  Freret 477 

Elder  vs.  Rouse 246 

Ellis  vs.  Kreutzinger 395,  389 

Elton,  Pritchard  vs 260 

Ely,  Baldwin  vs 461 

Euiery  vs.  Bank 296 


PAGE 

Enions,  Miller  vs 52 

Estate,  Handy's 56 

Express  Co.,  Brockway  vs 324 

Express  Co.,  Fitzsimmons  vs 269 

Eycleshimer,  Stover  vs 53 

Ezekiel,  Schiff  vs 488 


IF- 


Farmers'  Bank  vs.  Blevins 341 

Farwell,  Donaldson  vs 213 

Feagin,  Schiffer  vs 248 

Fenley  vs.  Pritchard 127 

Fei'guson,  Building  Association  vs  282 

Fielding  vs.  Kymer 435,  300 

Fields  vs.  Creditors 484 

Finch  vs.  Mansfield ...329 

Finn  vs.  Brown 372 

Fishe,  Hazard  vs 358,  341 

Fisher,  Bank  vs 296 

Fisher,  Conrad  vs 341 

Fisher  vs.  Gardely 210 

Fisher  vs.  Kyle 73 

Fisher  vs.  Seligman 374 


Fitzpatrick  vs.  Insurance  Co 405 

Fitzsimmons  vs.  Express  Co 269 

Flagg  vs.  Mann 496 

Florshein  Bros.  vs.  Howell,  Phelps 

&  Co 128 

Forbes,  Bruce  vs 390 

Forbes  vs,  Burke 55 

Forstall  vs.  Consolidated  Associa- 
tion  468 

Forsyth  et  al.,  Union  Bank  vs 263 

Foster,  Chicago  Dock  Co,  vs 358 

Fourth  Street  Bank  vs.  Yardley  ...  499 

France  vs.  Clark 383 

Freiburg  vs.  Dreyfus 88 

Freret,  Edson  vs 477 


o 


Gaither,  Gates  vs 99 

Galley,  Bank  vs 341 

Gates  vs.  Gaither 99 

Gay  vs.  Moss 95 

Gause  vs.  Bullard 482 

Gayarre  vs.  Tunnard 484 

Geddes  vs.  Bennett 118 

Gerdau,  Soltan  vs 357,  457,  462 

Gibson  vs.  Stevens 358,  341 

Gibson  vs.  Warden 215 

Gill  vs.  Kymer 300,  435 

Gillet  et  al.  vs.  Whiting 426 

Gillet  vs,  Whitney ..127 

Gilpin  vs.  Howell 385 

Givanovich  vs.  Bank 349,280,  461 

Gleason,  Belknap  vs 158 

Gloster,  Morton  vs 73 

Godsall  vs.  Boldero 406 

Goodrich  vs.  Bodley 470 


Goodwin,  Abbot  vs 120 

Goodwin  vs.  Loan  Co 280,  441 

Gottlieb  vs.  Hartman 195 

Gordely,  Fisher  vs 210 

Gover,  Price  vs 385 

Grant,  Shaw  &  Co.  vs 507 

Gravier  vs.  Carraby 71 

Green,  King  vs 73 

Greenbaum  vs.  Burnes 341 

Griswold  vs.  Seligman 374 

Gruman  vs.  Smith 127 

Guichard  vs.  Morgan. 300 

Grant,  Insurance  Co.  vs 390 

Greenwell  vs.  Haydon 273 

Guerdon,  Norwood  vs 390 

Guibert,  Lloyd  vs 324 

Guichard  vs.  Morgan 435 

Gumbel  vs.  Beer , 296 


Table  of  Cases  Cited. 


XXV 


h: 


PAGE 

Hale  vs.  Milwaukee  Dock  Co 341 

Hall  vs.  Coresran 73 

Halliday  vs.  Holgate 206 

Halsey  vs.  Warden 296 

Hamlet,  Sumner  vs 120 

Hanchett  vs.  Buckley 341 

Hancock  vs.  Insurance  Co 158,    26 

Handy's  Estate 56 

Hanna  vs.  Bry 31 

Hanna  vs.  Creditors 477 

Hanover  Bank  vs.  Am.  D.  &  T.  Co..341 

Hanson,  Bank  vs 248 

Hardie  vs.  Wrio;ht 248 

Hardin  vs.  Boyds 158 

Harkness,  Bank  vs 120 

Harris,  Bank  vs 248 

Harris,  Parker  &  Co.   vs.   Nicolo- 

poalo 347,  343 

Hart,  Taussig  vs 385 

Hartley,  Brewster  vs 148 

Hartman,  Gottlieb  vs 195 

Hawkins,  Lewis  vs 158 

Hay  don,  Greenwell  vs 273 

Haves,  Wood  vs .385 

Hazard  vs.  Fishe 358,  341 

Hazzard,  Life  Insurance  Co.  vs 401 

Heber  vs.  Thompson 99 

Heerins  vs.  Batner 395 

Heirs  of  Gray,  Citizens  Bank  of 

Louisiana  vs 468 

Henderson  vs.  Case 280,  191 

Hentz  vs.  Miller 357 

Hertz,  Yickers  vs 437 

Herzog,  Blanc  vs 154,    26 

Hier,  Comstock  vs 280 

Hile,  Conner  vs 313 


PAGE 

Hilliker  vs.  Kuhn 120,  117 

Hills  vs.  Smith 231 

Hilton  vs.  Tucker 127  * 

Hingham  Co.,  Bank  vs 373 

Hobson  vs.  Trevor 52 

Hodgkin,  U.  S.  Mutual  Ass'n  vs.. .405 

Hogan  vs.  Sompayrac 48,  38 

Holbrook,  Davis  vs 71 

Holgate,  Halliday  vs 206 

Holmes  vs.  Bank 296 

Holton  &  Winn  vs.  Hubbard  &  Co..348 

Honold  vs.  Meyer 461,  313 

Hornor  vs.  Sheriff 210 

Horton  vs.  Morgan 385 

Hoss  et  al.  vs.  Williams 482 

Howard,  Cun-ier  vs 390 

Howe  vs.  Austin 99 

Howe  vs.  Powell 106 

Howell,  Gilpin  vs 385 

Howell,  Phelps  &  Co.,  Florshein 

Bros,  vs 128 

Howland  vs.  Woodruff 357,  439 

Hubbard  &  Co.,  Holton  &  Winn 

vs 348 

Hubert  vs.  Clark  et  al 26 

Huchburger,  County  vs 248 

Hughes,  Hyllested  &Co.  vs.  Klin- 
gender  Bros 98 

Hulbert  vs.  Clark 158 

Hunt,  Commercial  Bankvs 341 

Hunt  vs.  Eousmanier 238,  97 

Hunt    &    Macauley    vs.   Railroad 

Co 320,  309 

Husband,  Marotvs 210 

Hyde,  Stockton  vs 477 


India  and  London  Life  Insurance 

Co.,  Dalby  vs 407 

Ingersoll  et  al.,  Williams etal.  vs..  34 

Ingraham,  Lallande  vs 133 

Insurance  CJo.,  Bombach  vs. 401 

Insurance  Co.,  Brown  vs 161 

Insurance  Co.,  Crowley  vs 390 

Insurance  Co,  vs.  Dry  Dock  Com- 
pany  378 

Insurance  Co,  Fitzpatrick  vs 405 


Insurance  Co.  vs.  Grant 390 

Insurance  Co,  Hanesck  vs 158,  26 

Insurance  Co.  vs.  Kijer 346,  341 

Insurance  Co.,  Lynde  vs 395 

Insurance  Co.,  Norton  vs 390 

Insurance  Co.,  Sherman  vs 390 

Insurance  Co.,  Webster  vs 390 

Insurance  Co.,  Wheeler  vs 519,  515 

Iselin,  Clarke  vs 95 

Israel,  Turner  vs 300 


XXVI 


Table  of  Cases  Cited. 


PAGE 

Jackson  vs.  Lemie 106 

Jackson,  Parsons  vs 280 

Jacobi  vs.  Credit  Lyonnais 324 

Jacquet  vs.  Creditors 237,  117 

James,  Poche  vs 479 

Janin,  Bank  vs 110,  98 

Jarvis,  Joslin  vs 269 

Jarvis  vs.  Rogers 249,  248,  188 

Jaudon,  Markhain  vs 127,  420,  421 

Jaures  vs.  Breaux 210 

Jaures  vs.  Pike 69 

Jenness,  Peck  vs 477 


PAGE 

Jerome  vs.  McCarter 265,  236,  213 

.Jewett  vs,  Warren 132 

Jones,  Deloach  vs 133 

Jones,  Moore  &  Janney  vs 373 

Johnson,  Agnew  vs 195 

Johnson,  Coldcleugh  vs 158 

Johnson,  Pitotvs 378,  377 

Johnson  vs.  JStear 206 

Johnson  vs.  Van  Epps 401 

Joslin  vs.  Jarvis 269 

Joy  vs.  Adams ,„„„ 158 


ik: 


Kaltenback  vs.  Lewis 437 

Kelly,  Bank  vs 296 

Kennedy  vs.  Bossiere 70 

Ketchum  vs.  ISt.  Louis 502 

Keyes  et  al.,  Olmstead  vs 405 

Kidder,  Daws  vs 313 

Kidder,  Moore  vs 358 

Kijer,  Insurance  Co.  vs 346.  341 

Kimbal,  Stokell  vs ...401 

King  vs.  Green 73 

Kirkpatrick  &  Co.  vs.  Oldham 210 

Kirwan,  CaflQn  ys 57 


Kittridge  vs.  "Warren 479 

Klingender  Bros.,  Hughes,  Hy ne- 
sted tt  Co.  vs 98 

Kloppenburg,  Case  vs 487 

Knapp,  Bank  vs 154,  26 

Knowlton,  ISpring  Co.  vs 77 

Knox,  Tiedman  vs 311,  342 

Kreutzinger,  Ellis  vs 389,  395 

Kuhn,   Hillikervs 120,  117 

Kyle,  Fisher  vs 73 

Kymer,  Fielding  vs 300,  435 

Kymer,  Gill  vs 300,  435 


Labanrie  vs.  Woods 488 

Labouisse  vs.  Rope  Co 507 

Lacombe,  Steward  vs 489 

Laird,  Bank  vs 246 

Lalaurie  et  als.,  Morris  et  al.  vs 507 

Lallande  vs.  Ingraham 133 

Lallande  vs.  His  Creditors 298,  442 

Laloirevs.  Wiltz 248 

Lamar  vs.  Micon 326 

Lambeth,  Moore  vs 313 

Lambert,  Youngvs 341 

Lanaux'  Succession 112 

Landry  vs.  Blanchai'd 507 

Latham  vs.  Bank 390 

Lathrop,  Ogden  vs 206 

Lawler  &  Hugh  vs.  Cosgrove 106 

Lawrence  vs.  Maxwell 206 

LeBlanc  vs.  Bouchereau 106 

Lecroy  vs.  Waite 385 

Lee  vs.  Bradley 133 

Le  Merchant  vs.  Moore 383 


Lemle,  Jackson  vs 106 

Leristones,  Wickham  vs 114 

Levert  vs.  Creditors 71 

Levy  vs.  Wise 70 

Lewis  vs.  Banking  Co 300 

Lewis  vs.  Hawkins 158 

Lewis  vs.  Mott 188 

Lewis,  Kaltenback  vs 437 

Life  Insurance  Co.  vs.  Hazzard 401 

Little,  Wilson  vs 147 

Liverpool  Steam  Co.  vs.  Phoenix 

Ins.   Co 333,  324 

Lloyd  vs.  Guibert 324 

Loan  Company,  Goodwin  vs.. 280,  441 

Loan  and  Trust  Co.,  Pauly  vs 376 

Loeb,  Bank  vs 249,  248 

Logan,  Bank  vs 296 

London  Joint  Bank  vs.  Simmons.. 300 

Loyd  vs.  Bank 248 

Lynde  vs.  Insurance  Co 395 

Lynn,  Penney  vs 56 


Table  of  Oases  Cited. 


xxvii 


:m: 


PAGE 

Macon  Bank,  Nesbit  vs 369 

Mann,  Flag^  vs 496 

Mansfield,  Finch  vs 329 

Markham  vs.  Jaudon 127,  420,  421 

Marot  vs.  Husband 210 

Marshall,  Bank  vs 82 

Marshall,  Tanneret  vs 71 

Marth  vs.  Whitmore 268 

Martin  vs.  Casey 507 

Martin  vs.  Coles 435 

Martin  vs.  Creditors 84,  341 

Martin,  Dean  vs 71 

Martin  vs.  Stebbins 405 

Martini  vs.  Coles 300 

Matthews  vs.  Albert 373 

Matthews  &  Finlay  vs.  Their  Cred- 
itors   474 

Matthews,  Finlay  &  Co.  vs.  Ruth- 
erford   287,  90 

Maureau,  Citizens  Bank  vs  ...482,  510 

Maxwell,  Lawrence  vs 206 

Means  vs.  Bank  of  Randall 300, 

47,  13 

Merrifield  vs.  Baker 390 

Merrill,  Palmer  vs 390 

Merill  &  Co.,  Carter  vs 341,  357 

Meyer,  Bank  vs 296 

Meyer,  Honold  vs 313,  461 


PAGE 

Meyers  vs.  Schuman 405 

Micon,  Lamar  vs 326 

Milford,  Milford  vs 216 

Miller  vs.  Emons 52 

Miller,  Hentz  vs 357 

Miller  vs.  Shotwell 106,  102 

Milwaukee  Dock  Co.,  Hale  vs 341 

Mineral  Water  Co.  vs.  Deblieux  et 

al 379 

Mitchell  vs.  Winslow 216 

Monticon  vs.  Mullen 31 

Moore  &  Janney  vs.  Jones 373 

Moore  vs.  Kidder 358 

Moore  vs.  Lambeth 313 

Moore,  Le  Merchant  vs 383 

Moreau,  Bank  vs 507 

Morgan,  Guichard  vs 300,  435 

Morgan,  Horton  vs 385 

Morris  et  al  vs.  Lalaurie  et  als 507 

Morris  vs.  Sheriff 24& 

Morris,  Ware  vs 106 

Morton  vs.  Gloster 73 

Moss,  Gay  vs 95 

Mott,  Lewis  vs 188 

Mullen,  Monticon  vs 31 

MuUer  vs.  Ponder 281 

Murphy  vs.  Red 405 

Mutual  Company  vs  Allen 405 


IMCc 


McCalla  vs.  Clark 231 

McCarter,  Jerome  vs 265,  236,  213 

McCombic  vs.  Davies 435 

McCormick,  Caperton  vs 120 


McCullough  vs.  Roots 341 

Mcllrath,  Chapman  vs 390 

McKenna,  Ducasse  vs 175 


IsT 


National  Bank  vs.  Boyce 341 

National  Bank  vs.  Case 370 

National  Life  Insurance  Co. ,  Dixon 

vs 405 

Navulshaw  vs.  Brownrlgg 437 

Nelson  &  Co.  vs.  Simpson 477 

Nesbit  vs.  Macon  Bank 369 

Nettles,  Allen,  Bush  &  West  vs. 

243,  237,  97 

Neevins  vs.  Baker 389 

Neven  vs.  Roup 132 


New  Orleans,  Conger  vs 154,  26 

Newsom  vs.  Thornton 435,  300 

Nicolopoalo,    Harris,     Parker    &     "" 

Co.  vs 347,  343 

Nickerson,  Pope  vs 324 

Nisbit  vs.  Trust  Co 120 

Nomeyer,  Bank  vs 296 

Northampton,  Salt  vs 390 

Norton  vs.  Insurance  Co 390 

Norton.  Pritchard  vs 326 

Norwood  vs.  Guerdon 390 


XXVlll 


Table  of  Cases  Cited. 


O 


PAGE 

Gates  vs.  Bank 280 

Ogden  vs.  Lathrop 206 

Oldham,  Kirkpatrick  &  Co.  vs 210 


Olmstead  vs.  Keyes  et  al 405 

Ory,  Winchester  vs 133 


Paine,  Grain  vs 390 

Palmer  vs.  Merrill 390 

Parker  vs.  Baxter 461 

Parsons  vs.  Jackson 280 

Pauly  vs.  Loan  and  Trust  Co 376 

Payne,  Burdon  Sugar  Ref.  Co.  vs.. 517 

Payroux,  Boynton  vs 127 

Peek  vs.  Jenness 477 

Pellerin,  Collins  vs 106 

Peninsular  Co.  vs.  Shand 324 

Penn  Co.,  Colgate  &  Co.  vs 300,  296 

Penney  vs.  Lynn 53 

Pepper  vs.  Dunlap 246 

Peugh  vs,  Davis 260 

Phoenix  Ins.  Co.,  Liverpool  Steam 

Co.  vs 333,  324 

Piclievs.  James 479 


Pickens  vs.  Sheriff 487 

Piffet  et  als..  Publishing  Co.  vs 470 

Pike,  Jaures  vs 69 

Pitot  vs.  Johnson 378,  377 

Pollard  vs.  Vinton 321,  299 

Pond,  Andrews  vs 321 

Ponder,  31uller  v? 281 

Pope  vs.  Xickerson 324 

Porter  vs.  Oorring 215 

Powell,  Howe  vs 106 

Price  vs.  Cover 385 

Pritehard  vs.  Elton 260 

Pritchard,  Fenlev  vs 127 

Pritehard  vs.  Xorton  326 

Publishing  Company  vs.  Piffet  et 

als 470 

Putnam  vs.  Upton 370 


IR 


Railey  vs.  Row 231 

Railroad  Co.  vs.  Bank 280 

Railroad  Co.,  Hunt-McCauley  vs. 

320,  309 
Railroad  Companj',  Shaw  vs..  .307, 

319,  445 

Railroad  Co.,  Woodward  vs 114 

Ralli,  Collins  vs 357 

Randall,  Ditson  vs 358 

Ray,  Cooper  vs 206 

Red,  Murphy  vs 405 

Reiss,  DeBlois  vs 85 

Renshaw  vs.  Creditors 262,  237,  97 

Reros.  Eckel  vs 405 

Rice  vs.  Cutter 312 

Rice  vs.  Wood 269 

Richardson  vs.  Bank,. 296 


Ritter  vs.  Smith 405 

Robb  vs.  Wagner 488 

Rogers,  Jarvis  vs 249,  248, 188 

Romero  vs.  Bayard 249 

Roots,  McCullough  vs 341 

Rope  Company.  Labouisse  vs 507 

Roscarrick  vs.  Barton 556 

Roup,  Neven  vs 132 

Rouse,  Elder  vs 246 

Rousmanier.  Hunt  vs 238,  97 

Rousseau,  Succession  of 482 

Row,  Railey  vs 231 

Rowan  vs.  Bank 231 

Russell,  Shropshire  vs 507 

Russell  vs.  Southard 260 

Rutherford,    Matthews.   Finiey  & 
Co.  vs ; 282,  90 


s 


Saloy  vs.  Bank 461 

Salsy  vs.  Bank 349 

Salt  vs.  Northampton 390 


Saul,  Brother  vs 215 

Savings  Bank,  Crowley  vs 461 

Savings  Bank,  Tucker  vs 273 


Table  of  Cases  Cited. 


XXIX 


PAGE 

Savings  Co.,  Talty  vs 18S 

Savings  Institution,  Yeatinan  vs.. .213 

Sawver  vs.  Upton 370 

Schiff  vs.  Ezekiel 488 

Schiffer  vs.  Feagin 248 

Schuman,  Meyers  vs 405 

Scudder  vs.  Union  Bank 321,  326 

Searight  vs.  Bank 248 

Seawall  vs.  Burdrich  et  als  ....300,  296 

Seligman,  Burgess  vs 374 

Seligman,  Fisher  vs 374 

Seligman,  Griswold  vs 374 

Senecal  vs.  Bauze 249 

Shand,  Peninsular  Co.  vs 324 

Shaw  vs.  Railroad  C0....445,  319,  307 

Shaw  vs.  Silloway 158 

Shaw  &  Co.  vs.  Grant 507 

Sheriff,  Hornor  vs 210 

Sheriff,  Morris  vs 246 

Sheriff,  Pickens  vs 487 

Sheriff  vs.  Stoddard 429 

Sherman  vs.  Insurance  Co 390 

Shotwell,  Miller  vs 106,  102 

Shropshire  vs.  Russell 507 

Silloway,  Shaw  vs 158 

Simpson,  Nelson  &  Co.  vs 477 

Skiff  vs.  Stoddard 429,  425,  385 

Slaughterhouse  Co.,  Smith  vs 378 

Slidell,  Campbell  vs 215 

Slocomb,  Union  Bank  vs 248 

Smith,  Allen  vs 120 

Smith,  Antoine  vs 71 

Smith,  Baker  vs 106 

Smith,  Gruman  vs .127 

Smith,  Hills  vs 231 

Smith,  Eitter  vs 405 

Smith  vs.  Slaughterhouse  Co 378 

Soltau  vs.  Gerdau 457 

Sompayrac,  Hogan  vs 48,  38 

Soule  vs.  Bank 390 

Soltau  vs.  Gerdau 357,462 

Southard,  Russell  vs 260 

Spring  Co.  vs.  Knowlton 77 


PAGE 

Spruance,  Tewbury  vs 268 

St.  Louis  Bank,  Allen  vs 

446,  439,  437,  436 

St,  Louis,  Ketchum  vs 502 

St.  Romes  vs.  Cotton  Drew  Co 31 

Starret  vs.  Barber 231 

State  vs.  Bank 482,  507,  510 

State  vs.  Tomlinson 390 

State  Bank  vs.  Bryant 341 

Steamer,  Swasey  &  Co.  vs 507 

Stear,  Johnson  vs 206 

Stebbins,  Martin  vs 405 

Stern  vs.  Bank 280 

Stern  Bros.  vs.  Bank 191 

Stevens,  Gibson  vs 358,  341 

Stevens  vs.  Warren 401 

Stevens  vs.  Wilson 439 

Steward  vs.  Lacombe 489 

Stewart  vs.  Davis 73 

Stewart  vs.  Drake 385 

Stockton  vs.  Hyde 477 

Stoddard,  Sheriff  vs 429 

Stoddard,  Skiff  vs 385,  429,  425 

Stokell  vs.  Kimbal 401 

Stone,  Succession  of 474 

Stout  vs.  Yager  Milling  Co 390 

Stover  vs.  Eycleshimer 53 

Sturges,  Adams  vs 248 

Succession,  Argote's 55 

Succession  of  Benjamin 513 

Succession,   D'Meza's 48 

Succession,  Dolhonde's 175 

Succession,   Lanaux' 112 

Succession  of  Rousseau 482 

Succession  of  Stone 474 

Succession  of  Walsh 508 

Suckling,  Donald  vs 205,  203,  188 

Suit  vs.  Woodhall 329 

Sumner  vs.  Hamlet 120 

Sumner,  Whitaker  vs 206 

Swasey  &  Co.  vs.  Steamer 507 

Swift  vs.  Tyson „ 280 


T 


Talty  vs.  Savings  Co 188 

Tanneret  vs.  Marshall 71 

Taussig  vs.  Hart 385 

Taylor  vs.  Bowers 77 

Taylor  vs.  Chester 73 

Tewbury  vs.  Spruance 268 

Texas  vs.  White 195,  280 

Thames,  The 321 

Thayer  vs.  Daniels 32 


The  Delaware 321 

The  Thames 321 

Thibodauxvs.  Anderson 99 

Thompson  vs.  Bank 383 

Thompson  vs.  Dolliver 47,  12 

Thompson,  Heber  vs 94 

Thompson  vs.  Toland 385 

Thornton,  Newsom  vs 300,  435 

Tibbotts,  Whitney  vs 132 


XXX 


Table  op  Cases  Cited. 


PAGE 

Tiedman  vs.  Knox 311,  342 

Toland,  Thompson  vs 385 

TomlinsoD,  State  vs 390 

Torne}^  Worthington  vs 385 

Trebiloch,  Upton  vs 370 

Trevor,  Hobson  vs 52 

Trumbal,  Trust  Co.  vs 120 

Trumbull,  Union  Trust  Co.  vs 300 

Trust  Co.,  Nisbit  vs 120 

Trust  Co.  vs.  Trumbal 120 


PAGE 

Tua  vs.  Carriere 477 

Tucker  vs.  Dearborn 29(> 

Tucker,  Hilton  vs 127 

Tucker  vs.  Savings  iBank 27^ 

Tullis,  Cook  vs 216 

Tunnard,  Gayarre  vs 484 

Turner  vs.  Israel 300 

Tutchett,  Combs  vs 120 

Tyson,  Swift  vs 280 


TJ 


Upton,  Putnam  vs 370 

Upton,  Sawyer  vs 370 

Upton  vs.  Trebiloch 370 

Upton,  Webster  vs 360 

Union  Bank  vs.  Forsyth  et  al 263 

Union  Bank,  Scudder  vs 321,  320 

Union  Bank  vs.  Slocomb 248 


Union  Trust  Company  vs.  Trum- 
bull  * 300 

United  States,  Cox  vs 326,  321 

Underwood,  Corlet  vs 431 

U.     S.     Mutual     Association    vs. 
Hodgkin 405 


^7" 


Vandenberg,  Coevdrey  vs 280 

Vanderhorst,   Bank  vs 282,  274 

Van  Epps,  Johnson  vs 401 

Variol,  Auje  vs 210 


Vermilj^e  vs.  Adams 195,  280 

Vickers  vs.  Hertz 437 

Vinton,  Pollard  vs 321,  299 


"W^ 


Wagner,  Robb  vs 488 

Waite,  Lecroy  vs 385 

Walsh,  Arick  vs 488 

Walker  vs.  Brown 497 

Walker,  Cochran  &  Co.  vs 507 

Walker  vs.  Walker 241 

Waller  vs.  Best 479 

Walsh,  Succession  of 508 

Warden,  Gibson  vs 215 

Warden,  Halsey  vs 296 

Ware  vs.  Morris 106 

Warehouse  Co.,  Anderson  vs 372 

Warnock  vs.  Davis 401 

Warren,  Jewelt  vs 132 

Warren,  Kittredge  vs 479 

Warren,  Stevens  vs '. 401 

Watts  vs.  Connors 326 

Weil  vs.  Insurance  Co 390 

Webre,  Syndic,  vs.  Beltran«fcCo....509 

Webster  vs.  Insurance  Co 390 

Webster  vs.  Upton 370 

Wheeler  vs.  Insurance  Co 515,  519 


Whitaker  vs.  Sumner 206 

White  vs.  Blanchard 210 

White,  Texas  vs 195,  280 

White,  Whitten  vs 22& 

Whiting,  Gilletet  al.  vs 426 

Whitney,  Gillet  vs 127 

Whitney  vs.  Tibbotts 132 

Whitmore,  Marth  vs 268 

Whitten  vs.  White 226 

Wilbur,  Delgado  vs 305,  296 

Wickham  vs.  Leristones 114 

Williams  et  al.  vs.  Ingersoll 34,  502 

Willis  vs.  Boone 210 

Wilmerding,  Cartwright  vs 355, 

358,  439 

Wilson  vs.  Bannen 154 

Wilson  vs.  Little 147 

Wilson,  Stevens  vs 439 

Wiltz,  Bank  vs 248 

Wiltz,  Laloire  vs 248 

Winchester  vs.  Ory 133 

Windham  vs.  Cerf 71 


Table  of  Cases  Cited. 


XXXI 


PAGE 

Winslow,  Mitchell  vs 21(5 

Windsor    &    Randolph,  Delop   & 

Co.  vs 98 

Wise,  Levy  vs 70 

Wright,  Hardie  vs 248 

Wolf  vs.  Wolf 94 

Wood,  Rice  vs 2G9 

Wood  vs.  Hayes 385 


PAGE 

Woodhall,  Suit  vs 329 

Woodruff,  Howland  vs 357,  139 

Woods,  Billet  vs 248 

Woods,  Labaurie  vs 488 

Woodward  vs.  Railroad  Co 114 

Worthington  vs.  Torney 385 

Woolly  vs.  Banking  Co 248 


IT 


Yager  Milling  Company,  Stout  vs.  390 
Yardley,  Fourth  Street  Bank  vs. .499 


Yeatman  vs.  Savings  Institution  ...213 
Young  vs.  Lambert 341 


A    TREATISE 


ON   THE   LAW   OK   THK 


CONTRACT  OF  PLEDGE 


AS   GOVEKNED   BY   BOTH   THE 


Common  Law  and  Civil  Law. 


CHAPTER  I. 

I  N  T  R  O  D  Li,  q  T  I 

When  men,  in  their  bu^n^Wrelatio?^i§j_>lo  not  trust 
each  other,  the  creditor  tlkmands  o^ie  debtor  securi- 
ties for  the  fulfilmen'bpf  his  ob].rwation.     The  securi- 


are  those' which  rest  upon  the  personalty,  or  personal 
property,  and  also  those  which  depend  upon  the  per- 
sonal obligation  of  a  surety,  warrantor,  or  endorser. 

In  the  Civil  law  real  securities  are  those  which  rest 
upon  the  thing  given  as  security,  the  7'es^  whether 
it  is  realty  or  personalty,  or,  in  the  terms  of  the 
Civil  law,  movable  or  immovable  propert}-  ;  and 
the  personal  securities  are  those  which  rest  upon 
the  obligation  of  a  person,  such  as  that  of  a 
surety,  or  warrantor,  or  endorser.  A  mortgage 
on  land  is  a  real  security,  both  in  the  Common 
law  and  the  Civil  law.  But  a  pledge  is  a  personal 
security  in  the  Common  law,  while  it  is  a  real  security 
in  the  Civil  law.  Hence,  the  contract  of  pledge  is  a 
personal  contract  in  the  Common  law,  and  a  real  con- 
tract in  the  Civil  law. 

And  hence,  the  action  to  enforce  the  pledge  is  a 
personal  one  at  Common  law,  and  a  real  one  in  the 
Civil  law.  Yet,  the  pledge  performs  the  same  office 
and  it  is  of  the  same  utility,  though  it  presents  great 
differences,  in  the  two  systems  of  law. 


2  The  Law  of  Pledge. 

The  Contract  of   Pledge. 

I  do  not  propose  to  define  the  contract  of  pledge. 
There  are  already  numerous  definitions  of  it.  ]Many 
of  them  are  defective ;  very  few  are  instructive 
or  useful.  Definitions,  at  best,  seldom  convey 
knowledge  or  information,  and  they  sometimes  create 
confusion.  As  the  Latin  maxim  says:  Omnia 
definitio  in  lege  ^ericulosa  est.  Every  broker, 
banker,  merchant,  knows  what  a  pledge  is,  without 
the  law  writer  defining  it.  But  let  us  look  into  its 
origin,  its  histor}',   its  nature,  its  rules  and  its  effects. 

The  pledge  springs  from  natural  law  and  is  of  the 
farthest  antiquity.  It  was  used  as  a  means  of  securing 
a  debt  in  the  primitive  relations  of  men.  We  find  it 
in  the  Mosaic  law.  "  No  man  shall  take  the  nether 
or  the  upper  millstone  to  pledge  ;  for  he  taketh  a  man's 
life  to  pledge." — Deuteronomy,  Chapter  xxix,  6.* 

It  is  curious  to  observe  in  this  provision  of  the 
Mosaic  law,  not  only  the  mention  of  pledge  in  the 
early  days  of  ihe  Hebrews,  but  also  the  exemption 
from  the  creditor's  reach  of  the  tools  and  instruments 
by  which  the  debtor  gains  a  living,  a  rule  of  law  which 
is  so  salient  in  the  modern  legislation  of  civilized 
nations. 

The  same  prohibition  to  pledge  the  tools  of  the  aiti- 
san  is  found  in  the  Roman  law  and  in  the  early  law 
of  France. f 

Tiie  Greeks  in  their  earliest  commercial  transactions 


♦Sf-e  also  Sees.  10.  11,  12.  13,  lUd. 

fDig.  L.  6  and  7;  Doniar.  Tawns,  XXV,  Cashing  Ed 


The  Contract  of  Pledge.  :i 

made  great  use  of  the  pledge,  as  all  trading  nations 
must  necessarily  do.  It  is  from  them  also  that  the 
Romans  took  the  mortgage  or  hypotheca^  which,  in 
its  incipiency,  strongl}-  resembled  the  pledge.  The 
hypotheca  covered  both  real  and  personal  property,  as 
the  pledge,  the  pigiius^  did.  Though  possession 
did  not  follow  the  hypotheca  or  mortgage,  as  it  did 
the  pledge,  the  distinctions  which  later  jurisprudence 
established  between  those  real  securities  barely  ex-« 
isted  at  first.  The  Roman  jurisconsult  said:  "  Inter 
pignus  et  hypothecain  tantuni  nominis  sonus  divert.'''' 

The  mortgage  of  the  old  French  law  itself  was,  at 
first,  the  dead  pledge,  mortuum  vadium^  the  pledge 
of  land  of  which  the  revenue  or  fruits  belonged  to  the 
creditor.* 

But  long  before  the  mortgage  was  introduced  into 
the  legislation  of  the  Romans,  the  pledge  of  real  estate 
had  been  established  among  them.  By  the  early  pig- 
norative  contract  known  as  the  fiducia^  the  land 
owner  secured  his  debt  b}'  transferring  the  possession 
of  his  land  to  his  creditor. 

The  word  pledge  comes  from  the  old  French  law 
term  pleige,  which  meant  a  suretv,  consequently  a 
personal  security,  not  the  real  security  of  the  pledge  or 
pawn.  The  ancient  French  law  writers,  to  mark  the 
superiority  of  the  })ledge  over  the  suretyship,  said  : 
"  Pleige  plaide  et  gage  rend.''''  The  suret}^  pleads, 
or  resists,  but  the  pledge  pays. 

The  pledge  in  the  Civil  law  applies  to  real  estate  as 

*  Baudrj'-Laeantinerie,  Xanti«seniPnt.  page  xvii. 


4  The  Law  of  Pledge. 

well  as  to  personal  property.  In  the  first  case  it  takes 
the  name  of  Antichresis^  which  is  also  of  Grecian 
origin.  But  it  is  in  the  pledge  or  pawn  of  personal 
property  that  we  find  the  immense  importance  of  the 
subject  in  the  present  age  of  vast  financial  and  com- 
mercial transactions.  Trade  is  the  support  of  the 
world.  It  is  by  it  that  nations  become  prosperous,  great 
and  powerful.  It  has  given  England  the  maritime 
empire  of  the  universe.  It  gave  Venice  its  once  for- 
midable powder.  It  gave  the  Italian  republics  of  the 
middle  ages  their  wealth  and  importance.  It  is  the 
principal  factor  of  the  phenomenal  prosperity  and 
riches  of  the  United  States  of  America.  The  aristo- 
cratic and  military  countries  which  affect  to  despise 
trade  and  tradesmen  are  fed  and  maintained  by  it, 
and  would  fall  without  it.  When  Napoleon  expressed 
his  contemptuous  opinion  of  the  English  in  saying 
that  they  were  a  nation  of  merchants^  he  was  giving 
the  very  reason  of  the  enormous  strength  which 
finally  mastered  his  own  genius. 

But  trade  without  credit  to  help  it  would  be  emas- 
culated and  pnralyzed.  It  is  credit  that  builds  up 
trade  at  home  and  carries  it  round  the  world.  The 
rich  as  well  as  the  poor  need  credit  in  commercial 
business,  for  it  is  seldom  that  trade  is  carried  on  upon 
a  cash  basis  entirely.  With  a  capital  of  $100,000  a 
merchant  will  extend  his  mercantile  or  financial 
operations  to  the  amount  of  $1,000,000.  But 
credit  signifies  the  means  of  boirowing,  and  the  means 
of  borrowinsj  are  obtained  by  securing  the  loan.    The 


The  C'ontract  of  PleditIE.  5 

precept  of  Shakespeare:  "  Neither  a  borrower  nor  a 
lender  be,"   is  only  true  when  the  loan  is  unsecured. 

To  secure  the  loan  necessary  to  commerce,  the 
mortgage  is  too  slow,  too  difficult  of  immediate  and 
safe  execution.  It  demands  the  investigation  of  title 
deeds,  the  discussion  and  framing  of  written  contracts, 
the  recording  of  the  same.  All  this  takes  time,  days 
or  weeks,  while  the  borrower  must  have  his  money 
immediately,  or  his  venture  may  be  lost.  To  secure 
the  loan,  therefore,  there  are  only  two  available 
modes  left  in  commercial  transactions  :  either  the  per- 
sonal security  of  the  endorser  or  surety,  or  the  real 
security  of  the  pledge  of  jjersonal  property. 

The  former  mode  is  objectionable  in  many  respects. 
Persons  able  to  pay  the  debt  of  the  borrower  which 
they  guarantee  are  loath  to  bind  themselves.  The 
borrowers  themselves  are  loath  to  ask  for  such  ser- 
vices. The  guaranties  of  endorsers  and  ordinary  sure- 
ties are  always  more  or  le^s  uncertain  and  may  escape 
the  vigilance  of  the  creditor.  T'heir  ability  to  make 
good  such  securities  is  itself  eventual.  Finall}^,  as  we 
said  above,  in  the  words  of  the  old  French  law  writers, 
''  the  surety  resists^  bat  the  pledge  pays,''"'  and  as  the 
Roman  law  expresses  it:  ""Plus  est  cautionis  in  re 
quam  in  perso7ia . ' ' 

The  pledge  is,  therefore,  the  great  security  of  the 
capitalist,  banker  and  merchant,  and  conversely  the 
means  of  the  borrower  to  obtain  the  required  loan. 

It  has  become  for  that  reason  the  most  important 
and  the  most  in  use  of    all  contracts  of  security  in  the 


6  The  Law  of  Pledge. 

innumerable  transactions  of  the  great  commercial  cities 
of  the  world.  In  its  rapid  movements  it  passes  from 
hand  to  hand,  without  dilatory  formalities.  It  secures 
in  the  same  day  several  and  successive  banking  or 
other  financial  operations.  It  transmits  capital  to  dis- 
tant places,  or  draws  it  home.  It  takes  the  shape  of  bills 
of  lading  for  that  purpose.  It  takes  the  shape  of  the 
ma?'gi?i  in  the  sale  of  futures,  for  mone}-  itself  may  be 
pledged.  It  takes  the  shape  of  bottomry  bonds  in 
maritime  contingencies.  It  takes  the  shape  of  ware- 
house receipts  when  money  is  borrowed  on  merchan- 
dise at  home.  It  takes  the  shape  of  policies  of  insur- 
ance either  on  life  or  property :  so  protean-like  is 
the  contract  of  pledge,  so  universal  its  necessity,  so 
great  the  securit}^  it  offers  to  the  lender  of  money. 

It  rests,  therefore,  both  upon  natural  law  and  the 
law  of  nations.  It  takes  from  equity  its  essential 
rules  ;  and  though  it  is  submitted  to  some  judicial 
forms,  as  to  what  will  constitute  the  proof  of  it  in  the 
Civil  law,  it  is  not  the  less  one  of  those  contracts  which 
are  found  among  all  nations,  which  are  necessary  in 
civil  life,  and  which  are  interpreted  everywhere  by 
common  principles  of  justice  and  honor. '^ 

Cicero  placed  the  contract  of  pledge  among  those 
principal  acts  of  civil  life  of  which  the  element  is  good 
faith.f 

In  the  earlier  days  of  modern  civilization  the  pledge 
had  been  the  subject  and  means  of  abases  which  had 


*  Troplong.  Xantissement,  Sec.  iJS. 
t  III  De  Officiis,  17. 


The  Contract  of  Pledge.  7 

thrown  a  certain  disfavor  upon  it.  It  had  faciUtated 
and  covered  fraudulent  transactions  in  which  dishon- 
est debtors  would  screen  and  save  their  property  from 
the  reach  of  their  creditors.  It  had  also  served  to 
conceal  usurious  terms  of  credit  which  rapacious 
money  lenders  would  impose  upon  hard  pressed  bor- 
rowers. For  these  reasons  the  legislators  in  the  Civil 
law  countries  surrounded  the  contract  of  pledge  with 
strict  formalities  and  severe  conditions,  such  as  a  writ- 
ten act  or  deed  in  which  the  sum  loaned  is  fixed  arid  the 
thing  pledged  is  described  minutely.  But  gradually 
the  interest  of  commerce  demanded  the  emancipation 
of  the  pledge  ;  facts,  as  usual,  imposed  their  authority 
upon  legislation  ;  the  wants  of  the  mercantile  world 
had  to  be  considered  and  protected,  and,  in  commer- 
cial and  financial  transactions,  the  pledge  was  disen- 
cumbered of  the  obstructing  requirements.  Hence, 
both  under  the  Common  and  the  Civil  law  that  con- 
tract is  now  effected  by  mere  delivery  of  commercial 
paper  or  effects,  and  by  endorsement  if  the  same  is 
made  to  order. 

Troplong,  the  eminent  Civil  law  writer  of  France, 
shows  the  all-important  part  which  the  pledge  plays 
in  the  affairs  of  a  merchant,  in  the  following  words  : 
"The  rapidity  with  which  commercial  business  is  car- 
ried on  does  not  accommodate  itself  to  the  forms  of 
the  mortgage  and  the  dilatoriness  inseparable  from 
landed  securities.  Besides,  real  estate  is  frequenth'^ 
mortgaged  by  merchants  only  at  the  last  extremity. 
A  stranger  to   the  commercial  movement,  real  estate 


8  The  Law  of  Pledge. 

only  becomes  its  auxiliary  and  surety  by  altering  the 
conditions  of  the  merchant's  credit.  In  the  normal 
state  of  a  well-established  commercial  house,  if  its 
word  alone  is  not  sufficient  to  obtain  confidence,  it  is 
on  the  merchandise  on  which  it  speculates  that  it  must 
place  the  basis  of  its  credit.  The  merchandise  in  that 
case  does  not  cease  to  fulfil  its  destination ;  it  is  the 
natural  security  offered  to  third  persons,  and  either  by 
procuring  money  when  sold,  or  by  procuring  it  on  a 
loan  which  it  secures,  it  remains  within  its  purpose 
and  its  destiny.  But  when  public  confidence  is  not 
satisfied  with  either  the  word  or  the  commercial  assets 
of  the  merchant ;  when  the  capitalist  only  consents  ta 
lend  him  money  on  the  security  of  things  v/hichare  not 
mercantile ;  when  it  is  necessary  that  the  landed 
property  come  to  the  assistance  of  failing  com- 
mercial credit,  then  it  is  a  signal  of  distress  and  of 
trouble.  That  is  why  merchants  of  high  commercial 
standing  will  not  encumber  their  real  estate.  It  is  in 
the  merchandise  which  constitute  their  assets  that  they 
put  the  confidence  offered  to  third  persons,  and  the 
safety  of  their  transactions.  Their  real  estate  remains 
outside  of  their  commercial  ventures ;  they  do  not 
draw  it  into  the  movement  of  their  speculations  ;  they 
keep  it  away,  on  the  contrary,  because  commercial 
business  is  prosperous  only  so  far  as  it  may  depend 
upon   its  own  resources."  * 

The  contract  of  pledge  may,  therefore,  well  be  said 
to  be  the  pivot  of  commerce. 

*  Troplong,  Xantissement.  Preface,  page  xiv. 


The  Contract  of  Pledge.  9 

It  has  in  modern  times  even  a  greater  importance 
than  it  had  formerly,  owing  to  the  immense  develop- 
ment that  personal  or  movable  property  has  taken 
within  the  present  century  in  every  part  of  the  civilized 
world.  With  the  Romans  and  in  the  countries  of 
Europe  in  ancient  times,  personal  property  was  of 
comparative  inferiority  to  real  estate.  '•''Res  mobilis 
res  V II is,'''' was  an  expression  used  to  show  the  poor 
estimation  in  which  movable  property  was  held.  The 
wealth  of  those  times  consisted  in  landed  estates  and 
belonged  almost  exclusively  to  the  nobility  and  the 
clergy.  The  law  bearing  upon  immovable  property 
or  realty  was,  therefore,  of  much  more  importance 
and  had  attained  a  higher  degree  of  perfection  than 
that  which  governed  personal  property. 

But  within  the  nineteenth  century,  human  industry, 
modern  discoveries  and  inventions,  the  establishment  of 
numerous  corporations  and  joint  stock  companies,  the 
opening  of  new  avenues  of  commerce,  have  created  a 
wealth  of  personal  property,  equal  if  not  superior  to 
that  of  real  estate.  The  laws  which  govern  it  have 
grown  in  proportionate  importance,  and  foremost 
among  these  laws  that  of  the  contract  of  pledge  has 
taken  a  considerable  development.  But  the  law  of 
pledge  of  the  Civilians  has  necessarily  progressed  in  a 
more  methodical  manner,  and,  therefore,  reached  a 
higher  and  earlier  degree  of  improvement  than  that  of 
the  Common  law.  Statutory  law  provides  for  the 
future  with  such  prevision  or  foresight  as  the  human 
mind  is  susceptible  of.     Common   law  is   formed   in 


10  The  Law  of  Pledge. 

proportion  as  new  facts  and  new  events  arise,  upon 
"which  it  is  based.  It  looks  to  the  past,  not  the  future. 
lit  moves,  therefore,  slowly  and  irregularly  Prece- 
dents have  to  be  established  before  custom  may  be 
fixed  and  acquire  the  force  of  law.  Judge  Story,  in 
speaking  of  some  rules  of  the  contract  of  pledge,  says  : 
^'  Few  cases  have  arisen  upon  this  subject  in  the  Com- 
mon law ;  and  it  would  be  unsafe  to  rely  wholly  upon 
the  Civil  law,  as  furnishing  safe  analysis  for  our  guid- 
ance. In  the  absence,  however,  of  any  authority,  the 
Civilians  may  assist  our  inquiries  ;  and  for  this  purpose, 
Domat,  in  an  especial  manner,  may  be  consulted  with 
advantage."* 

A  more  recent  writer  of  the  Common  law  has  made 
a  similar  acknowledgment  and  said :  "  This  whole 
doctrine  of  pledge  is  one  which  has  unevenly  developed 
at  the  Common  law,  and  our  rules  are  frequently  de- 
rived from  the  Roman  law  of  pledge,  which,  however, 
in  many  points  differs  from  our  own  ;  or  else  we  bor- 
row from  the  analogies  of  the  chattel  mortgage."  f 

For  those  who  will  follow  the  advice  of  Judge 
Story,  there  are  more  modern  and  even  better  au- 
thorities to  consult  in  the  difficulties  of  the  law  of 
pledge  than  Domat,  who  was  still  fettered  in  the  then 
unchanged  principles  of  the  Roman  law.  Those  safer 
guides  are  the  great  commentators  of  the  Code  Napo- 
leon, whose  books  have  cleared  the  confusion  of  the 
ancient  law  of  pledge  and  who  expound  the  subject 
as  it  now  stands  in  the  modern  Civil  law. 


*  Story,  on  Bailments,  Sec.  313. 

t  Schonler,  on  Bailments,  pp.  233,  234. 


The  Contract  of  Pledge.  11 

There  is  still  among  those  distinguished  writers 
«ome  diversity  of  opinion  on  certain  minor  points, 
wliicli  is  inseparable  from  the  discussion  of  legal  doc- 
trines ;  but  the  Civil  law  of  pledge  altogether  is  at 
the  present  time  fixed  and  established  with  far  more 
precision  than  that  of  the  Common  law.  In  the  lat- 
ter there  is  yet  a  great  deal  of  confusion  and  of  disa- 
o^reement  between  the  text  writers  and  the  decisions 
of  the  courts.  Some  of  these,  being  unbound  by  any 
rules  prescribed  by  statutes,  have  departed  widely 
from  the  original  and  even  essential  principles  of  the 
pledge  proper,  and  have  established  a  jurisprudence 
which  it  is  sometimes  difficult  to  reconcile  with  the 
definition  of  the  pledge  given  by  the  commentators  of 
the  Common  law  itself,  from  Judge  Stor}-  down  to 
those  of  the  present  day. 

A  cause  of  confusion  and  uncertainty  on  tiiat  sub- 
ject is  to  be  found  also  in  the  likeness  of  the  pledge 
and  the  chattel  mortgage.  In  substance  always,  and 
in  form  often,  these  two  contracts  of  security  differ; 
yet,  when  the  form  is  the  same,  they  are  sometimes 
taken  one  for  the  other,  and  it  is  then  for  the  courts 
a  source  of  embarrassment  and  difficulty  to  distinguish 
between  them.  In  point  of  substance  they  differ  in 
this,  that  in  case  of  the  pledge,  the  general  property 
oi*  title  remains  in  the  pledgeor,  and  only  a  special 
property  or  lien  passes  to  the  pledgee  ;  and,  in  case  of 
the  chattel  mortgage,  the  general  property  itself 
passes  to  the  mortgagee,  with  a  right  of  redemption 
remaining   in    the  mortgageor.     In  the   pledge,  if  the 


12  The  Law  of  Pledge. 

debt  is  not  paid  at  maturity,  the  creditor  must  fore- 
close and  cause  the  thing  pledged  to  be  sold  in  order 
that  he  may  be  paid  out  of  the  proceeds  ;  but  he  does 
not  become  the  owner  of  the  thing  for  want  of  re- 
demption by  the  pledgeor.  In  the  mortgage,  if  the 
debt  is  not  paid  at  maturity,  the  mortgagee  becomes 
absolute  owner  of  the  thing  mortgaged  by  the  mere 
want  of  redemption  by  the  mortgageor,  subject,  it  is 
true,  to  the  equity  of  redemption. 

In  point  of  form  the  two  contracts  differ  in  two 
particulars.  In  the  pledge,  no  writing  is  necessary. 
The  agreement  is  verbal,  and  may  even  be  implied. 
In  the  mortgage,  the  contract  must  be  in  writing.  In 
the  pledge,  possession  must  be  transferred  to  the 
pledgee,  in  the  mortgage,  possession  generally 
remains  in  the   mortgfao^eor. 

When  the  pledge  is  in  writing,  or  when  by  the 
mortgage  possession  is  given  to  the  mortgagee,  the 
question  often  arises  whether  the  contract  is  one  of 
pledge  or  of  mortgage,  and  the  question  is  sometimes 
of  difficult  solution.  The  Court  of  Massachusetts  has 
acknowledged  the  confusion  and  the  difficulty  when  it 
said:  "While  the  distinction  between  these  two  forms 
of  security  is  well  defined,  yet,  owing  to  the  haste  with 
which  transactions  are  often  made,  and  the  measrre- 
ness  or  abbreviations  of  the  written  papers  which  ac- 
compan}^  them,  it  is  not  easy  always  to  determine 
what  character  is  properly  to  be  attributed  to  them."* 

The  confusion  between  the  pledge  and  chattel  mort- 

"  Thompson  vs.  Dolliver.  13-2  Mass.  104. 


The  Contract  of  Pledge.  13 

gage  has  produced  a  certain  vagueness  or  looseness  of 
language  in  relation  to  the  two  modes  of  securit}^ 
which  has  reached  the  courts  of  this  country,  and 
even  the  highest  of  them  all,  the  Supreme  Court  of 
the  United  States.  In  a  case  in  which  that  august 
tribunal  passed  upon  a  question  of  pledge,  the  organ 
of  the  court,  one  of  its  most  distinguished  members, 
said:  "As  the  verbal  mortgage  or  pledge  included 
all  the  cattle,  and  was  accompanied  by  a  delivery,  it 
was  good,  at  least  as  against  the  defendants,  irre- 
spective of  notice.  The  defendants  were  chosen  as 
factors,  they  having  before  acted  for  the  same  parties 
in  similar  transactions,  where  drafts  had  been  drawn 
on  them  against  the  shipments.  The}-  did  not  advance 
an}'  money  on  account  of  this  shipment,  they  parted 
with  no  interest,  relinquished  no  legal  right,  and  stood 
in  no  better  position  to  dispute  the  validity  of  the 
mortgage  or  pledge  than  did  Lyons  himself.''* 

There  seems  to  be  in  the  mind  of  the  eminent  Jus- 
tice some  confusion  whether  the  transaction  at  issue 
was  a  pledge  or  a  chattel  mortgage  ;  or,  more  prob- 
ably, he  meant  to  use  the  words  "verbal  mortgage," 
as  equivalent  to  *'  pledge,""  making  the  term  mortgage 
a  generic  one  for  the  modes  of  security  depending 
upon  personal  property,  but  designating,  in  this  in- 
stance particularly  the  pledge,  inasmuch  as  the  mort- 
gag-e  proper  must  be  in  writing,  and  can  not  be  ver- 
bal.    With  all  due  respect,  we  doubt  that  the  use  of 

*  Means  vs.  Bank  of  Randall.  14(i  U.  S.  628. 


14  The  Law  of  Pledge. 

such  language  is  warranted  by  the  law  of  either  pledge 
or  mortgage. 

The  Civil  law  is  free  from  such  confusion  or  uncer- 
tainty in  this  respect ;  first,  because  its  law  of  pledge 
is  better  determined  by  statute  ;  and  secondly,  because 
it  contains  no  chattel  mortgage  and  allows  the  mort- 
gage of  immovable  or  real  property  only. 

In  a  previous  case  arising  under  the  law  of  Louis- 
iana, where  the  Civil  law  is  established,  the  same  con- 
fusion of  the  pledge  and  mortgage  appears  in  the 
judgment  of  the  Supreme  Court  of  the  United  States, 
The  question  was  as  to  the  validity  of  a  pledge  of 
commercial  securities,  which  had  remained,  under 
certain  circumstances,  in  the  possession  of  the  pledgeor. 
The  court,  in  commenting  upon  the  transfer  of  the 
collaterals,  said  :  "When,  as  in  that  case,  the  title  has 
been  transferred  to  the  creditor,  and  the  collections 
are  made  for  his  benefit,  the  pledgeor  merely  acting 
as  his  servant  or  agent  in  making  them,  the  character 
of  the  security  is  not  affected  at  the  Common  law  b}' 
the  debtor  having  actual  possession  of  the  collaterals, 
there  being  no  fraud  in  the  transaction.  In  such  case 
they  are  held  by  the  creditor  by  way  of  mortgage  as 
well  as  -pledge,  and  a  mortgage  is  valid  notwithstand- 
ing the  mortgageor  has  the  possession.  The  difference 
(jrdinarily  recognized  between  a  mortgage  and  a 
pledge  is,  that  title  is  transferred  by  the  former  and 
possession  by  the  latter.  Indeed  possession  may  be 
considered  'as  of  the  essence  of  a  pledge  (Pothier, 
Nantissement,  8)  ;  and  if  possession  be  once  given 
up,  the  pledge,  as  such,  is  extinguished.     The  posses- 


l^HE  Contract  of  Pledge.  15 

sion  need  not  be  actual ;  it  may  be  constructive ;  as 
where  the  key  of  a  warehouse  containing  pledged  goods 
is  delivered,  or  a  bill  of  lading  is  assigned.  In  such 
case  the  act  done  will  be  considered  as  a  token,  standing- 
for  actual  delivery  of  the  goods.  It  puts  the  property 
under  the  power  and  control  of  the  creditor.  In  such 
cases  such  constructive  delivery  can  not  be  effected 
without  doing  what  amounts  to  a  transfer  of  the  prop- 
erty also. 

"  The  assignment  of  a  bill  of  lading  is  of  that  kind. 
Such  an  assignment  is  necessary  where  a  pledge  is 
proposed  in  order  to  give  the  constructive  possession 
required  to  constitute  a  pledge  ;  and  yet  it  formally 
transfers  the  title  also.  In  such  case  there  is  a  union 
of  two  distinct  forms  of  security — that  of  mortgage 
and  that  of  pledge;  mortgage  by  virtue  of  the  title, 
and  pledge  by  virtue  of  the  possession.  This  advan- 
tage exists  when  notes  and  bills  are  transferred  to  a 
creditor  by  way  of  collateral  securit3\  His  possession 
of  them  gives  them  the  character  of  a  pledge.  Their 
endorsement  if  payable  to  order,  or  their  delivery  if 
payable  to  bearer,  gives  him  the  title  also,  which  is 
something  more  than  a  pledge."  * 

These  remarks  about  the  double  security  of  pledge 
and  mortgage,  which  we  have  underscored,  are  mere 
obiter  dicta,  it  is  true ;  but  they  are  hardly  at  their 
proper  place  in  a  case  governed  by  the  Civil  law, 
because  the  mortgage  of  chattels  or  personal  property 
does  not  exist  in  the  Civil  law;   and  the  commercial 

*  Casey  vs.  Cavaroc,  9(»  U.  S.  477. 


10  The  Law  of  Pledge. 

securities  which  formed  the  subject  of  the  contention 
in  that  case,  being  personal  propert}',  constituted  a 
pledge  exchisively  of  a  mortgage. 

But  we  are  disposed  to  doubt  the  correctness  of  the 
distinguislied  Justice's  theory,  even  under  the  rules  of 
the  Common  law,  as  to  the  union  of  the  pledge 
and  the  mortgage  resulting  simply  from  the  pledge  of 
securities  transferred  to  the  creditor.  A  fundamen- 
tal principle  of  the  law  of  contract  is,  that  the 
intention  of  the  parties,  if  lawful,  governs  the 
agreement.  That  intention  of  the  parties,  in  a  word, 
is  the  law  of  the  contract.  When  a  debtor  pledges 
commercial  paper  or  other  securities,  and,  for  the  pur- 
-pose  of  the  pledge^  transfers  them,  either  by  endorse- 
ment, or  deliver}',  or  in  any  other  way,  to  the  creditor, 
he  does  not  intend  to  mortgcacre  them.  He  reserv^es 
all  his  rights  under  the  pledge — the  right  to  have  his 
propert}'  returned  to  him  if  he  pays  the  debt,  or  that 
it  should  be  sold  to  pay  the  creditor,  under  the  terms 
of  the  law  or  of  the  agreement ;  but  he  does  not  grant 
any  right  of  mortgage  to  the  creditor ;  the  latter  could 
not  become  absolute  owner  of  the  thing  pledged  by 
the  mere  failure  of  the  debtor  to  redeem  the  pledge. 
In  a  word,  the  debtor  has  pledged,  but  not  mortgaged, 
his  property,  whatever  may  be  the  form  of  the  pledge. 
He  has  given  to  the  creditor  the  single  securit}'  of  the 
pledge,  but  not  the  double  security'  of  pledge  and 
mortgage.  Could  it  be  said  that,  in  such  a  case  of 
pledge,  if  the  creditor  abandoned  the  possession  of  the 
thing  pledged,  and  thereby  lost  his  rights  upon  it,  he 


The  Contract  of  Pledge.  17 

would  still  retain  his  rights  of  mortgage  over  it,  be- 
cause, for  the  purpose  of  the  mortgage,  he  need  not 
have   possession  ? 

It  is  true  that  in  the  pledge  of  negotiable  paper  or 
other  commercial  securities,  the  ^^hX-Ox  transfers  them 
to  the  creditor,  and  the  title  thereb}'  passes  to  the  lat- 
ter;  but  it  only  passes  for  the  purpose  of  pledge,  not 
of  mortgage.  In  some  States  such  transfer  is  pro- 
vided for  bv  statute  as  the  mode  and  means  of 
pledging  that  kind   of  property. 

The  title  of  the  creditor  in  that  case  is  onl}-  a  legal 
simulation.  The  debtor  does  not  in  reality  convey  his 
property  to  him.  The  creditor  is  only  an  apparent 
owner.  The  ownership  is  still  in  the  debtor  after 
the  transfer,  as  it  is  a  constitutive  element  of  the 
pledge  that  the  pledgeor  remains,  during  the  exis- 
tence of  the  pledge,  the  owner  of  the  thing  pledged. 
The  principle  is  not  the  same  in  the  case  of  a  mort- 
gage, at  all  events,  of  a  mortgage  at  law,  leaving 
aside  the  mortgage  in  equity.  There,  when  the  title 
passes  to  the  creditor,  the  general  property,  which  is 
the  ownership  itself,  is  in  realit}'  transferred  to  the 
creditor,  subject  to  the  defeasance  which  pa3^ment  of 
the  debt  will  or  may  produce.  During  the  existence 
of  the  mortgage,  the  creditor  is  the  real  owner,  under 
condition,  of  the  things  morto^ai^-ed.  He  only  fore- 
closes  the  mortgage  for  the  purpose  of  entering  into 
possession  of  the  property  and  defeating  the  equity 
of  redemption. 

We  are  speaking  of    the  mortgage  of  the  Common 


18  The  Law  of  Pledge. 

law  alone,  for  that  of  the  Civil  law  transfers  no  title 
or  general  property  to  the  creditor,  and  only  gives 
him  a  lien  or  right  of  preference  in  the  thing  mort- 
o-asfed,  to  be  reahzed  from  the  proceeds  of  the  snle 
thereof  b}'  means  of  foreclosure. 

It  seems  clear,  in  cases  of  pledge,  that  the  union  of 
the  pledge  and  the  mortgage  can  not  be  said  to  arise 
from  the  mere  fact  of  a  transfer  of  the  securities  to  the 
creditor  without  the  intention,  expressed  or  implied, 
of  the  debtor  that  the  mortgage  should  accompany 
the  pledge.  But  we  are  inclined  to  think  that  even 
with  the  consent  of  the  parties  the  pledge  and  the 
mortgage  at  law  can  not  coexist  in  the  same  act;  in 
other  words,  that  the  same  property  can  not  be 
pledged  and  mortgaged  at  the  same  time  for  the 
same  debt  to  the  same  creditor,  owing  to  the  differ- 
ences and  incompatibility  of  the  two  contracts.  The 
mortgage  at  law  is  a  contract  by  which  the  debtor 
conve3's  his  property  to  the  creditor  as  security,  it  is 
true,  but  with  the  stipulation  that  in  default  of  pay- 
ment of  the  debt  the  creditor  shall  become  absolute 
owner.  The  stipulation  is  of  the  very  nature  of  the 
contract.  But  such  stipulation  would  be  null  and 
void  in  the  contract  of  pledge.  Any  clause  by  which 
the  pledgee  would  become  the  owner  of  the  pledge 
in  default  of  payment  is  prohibited  by  the  law.  There 
is  evidently  some  confusion  and  uncertainty  in  this 
subject  of  the  pledge  and  mortgage  being  united  in 
the  same  act  and  fused  together  by  the  transfer  of  the 
securities   to  the    creditor ;   and  there  is   nothing  set- 


The  Contract  op  Pledge.  19 

tied  or  determined  yet  in  that  respect  by  the  juris- 
prudence of  the  Common  law,  whatever  may  be  the 
weight  of  authority  of  the  dicta  in  the  opinion  of  the 
case  of  Casey  vs.  Cavaroc. 

In  his  recent  work  on  bailments,  Mr.  Edwards  ex- 
presses his  views  on  this  subject,  in  a  sense  adverse 
to  the  theory  of  the  united  pledge  and  mortgage. 
Speaking  of  the  transfer  of  title  of  commercial  se- 
curities, he  says:  "  In  respect  to  goods  and  chattels 
personal,  this  distinction  is  very  plain  ;  but  there  is  a 
large  class  of  cases  wliere  the  contract  still  remains  a 
pledge,  notwithstanding  the  title  is  conveyed.  Choses 
in  action  can  not  be  otherwise  delivered  as  a  collateral 
security,  and  hence,  as  to  these  and  such  incorporeal 
property  as  can  not  be  passed  from  one  to  another  by 
delivery,  the  fact  that  the  title  passes  does  not,  as  has 
sometimes  been  held,  create  a  mortgage.  Whether 
the  contract  shall  be  held  a  mortgage  or  a  pledge  is 
not  determined  by  that  fact  alone ;  the  title  must  be 
conveyed  in  order  to  create  a  mortgage,  but  it  is  not 
a  mortgage  simply  because  the  title  is  conveyed."* 

These  views  coincide  with  the  principles  of  the  Civil 
law.  Baudry-Lacantinerie,  one  of  the  more  modern 
commentators  of  the  Code  Napoleon,  says,  in  his  re- 
cent work  on  Pledge,  that  the  possession  of  an  incor- 
poreal thing  or  right,  indispensable  to  the  validity  of 
a  pledge,  can  only  be  effected  by  the  transfer  of  the 
title  to  the  pledgee  ;  but  that  such  transfer  is  only 
made  by  way  of  giiaranty ^  and  d;)es    not  convey   the 

*  Edwards  on  Bailments,  Sec.  246. 
Id.  Ibid.,  Sees.  219  and  220. 


20  The  Law  of  Pledge. 

ownership  or  property  of  the  thing.  If  it  did  the 
transaction  would  not  be  a  pledge.  The  transfer  of 
the  ownership  or  property  can  only  be  effected  by 
subsequent  foreclosure  of  the  pledge.  And  even 
when  the  parties  adopt  the  form  of  the  sale  for  the 
purpose  of  a  pledge,  the  ownership  is  only  apparently 
transferred.  In  reality,  the  title  is  only  transferred 
for  the  purpose  of  securing  the  creditor,  and  the 
debtor  remains,  notwithstanding,  the  unqualified 
owner  of  the  thing  pledged,  subject  only  to  the  lien 
of  the  former,  which  itself  depends  upon  the  fact  of 
possession.  There  is  no  diversit}'  of  opinion  in  this 
respect  among  the  Civilians.* 

Another  cause  of  the  departure  of  the  Common  law 
from  the  original  and  fundamental  principles  of  the 
contract  of  pledge  may  be  found  in  the  doctrine  of  the 
Equitable  liens,  peculiar  to  the  jurisprudence  of  Eng- 
land and  the  United  States,  and  unknown  to  the  Civil 
law.  In  the  latter  no  lien  or  privilege,  as  it  is  there 
termed,  can  be  contracted  for  b}'  the  parties.  It  is 
created  by  statute,  or  it  does  not  exist  at  all.  The 
pledge  only  confers  the  lien  and  right  of  preference 
to  the  creditor  if  the  contract  is  accompanied  by  pos- 
session of  the  thing  pledged.  The  same  indispensa- 
ble condition  of  possession  in  the  pledgee  is  part  of  the 
Common  law;  but  there  the  equitable  lien,  without 
the  possession,  produces  very  nearly  all  the  effects  of 
the  pledge  and   gives   to   the  preferred  creditor,  to  a 


Baudry-Lacantinerie,  Xanlissement,  pp.  44,  4i) 
Troplong,  Nantissement,  Sec.  30. 
Laurent,  Du  Gage,  See.  288  ct  seq. 


The  Contract  of  Pledge.  21 

considerable  extent  at  least,  all  the  benefits  and  ad- 
vantages of  that  contract,  to  the  prejudice  of  the  other 
creditors,  by  the  mere  intention  of  the  parties  that  he 
should  have  a  right  of  preference  over  some  specific 
property  of  the  debtor.  In  this  respect  all  that  equity 
jurisprudence  has  gained  in  favor  of  the  equitable  lien 
is  detracted  from  the  law  of  pledge.  Where,  under 
the  inflexible  rule  of  this  law,  that  the  pledgee  should 
be  in  notorious  and  unequivocal  possession  of  the 
property  of  his  debtor,  and  thereby  that  third  persons 
dealing  with  the  latter  should  be  informed^'of  the  en- 
cumbered condition  of  his  property,  by  the  principle 
of  equitable  liens,  the  third  persons  have  no  notice 
whatever  of  the  right  of  preference  given  by  him  to 
some  favored  creditor,  and  thc}^  deal  with  him  in  the 
false  belief  that  his  property  will  answer  for  his  debts 
generally  and  without  a  claim  of  priority  over  them. 
The  equitable  lien,  therefore,  works  in  the  dark  and 
arises  from  an  occult  understanding  with  the  debtor, 
whilst  the  pledge  must  act  in  broad  daylight,  under 
pain  of  nullity. 

This  relation  of  the  equitable  lien  to  the  law  of 
pledge  will  be  the  subject  of  a  special  chapter  in  this 
book. 


CHAPTER  II. 


Nature  and  Subject  Matter  of  the  Pledge. 
What   Things  May  Be  Pledged. 

1 .  All  personal  property,  according  to  the  Common 
law,  and  everything  movable,  according  to  the  Civil 
law,  corporeal  or  incorporeal,  which  is  susceptible  of 
alienation  and  of  delivery,  actual  or  symbolical,  may 
be  pledged.  Not  only  tangible  property  and  choses 
in  action,  but  even  mere  rights  are  the  subject  of 
pledge,  provided  they  may  be  delivered  at  least  ficti- 
tiously or  symbolically."^ 

2.  But,  as  the  ulterior  object  of  the  pledge  is  to 
enable  the  creditor  to  realize  it  by  sale  and  receive  the 
proceeds  in  payment  of  his  claim,  it  is  evident  that 
what  can  not  be  sold  does  not  ordinarily  form  the  sub- 
ject of  a  pledge.  Such  was  the  Roman  law,  as  enun- 
ciated in  the  Digest.  "  Earn  rem  quam  quis  emere  nofi 
potest  quia  commercium  ejus  non  est  jure  -pignoris 
accipere  non  potest.'' '''\ 

The  modern  Civil  law  and  the  Common  law  agree 
in  this  respect. 


*  Code  Xapoleon,  Art.  2075. 

Civil  Code  of  Louisiana,  Arts.  3154,  3155. 

Troplong,  Nantissement,  Sec.  261  et  seq. 

Story,  on  Bailments,  Sec.  290. 

Jones,  on  Pledges,  Sec.  49. 
t  Digest,  L.  1,  Sec.  2. 

Domat,  Des  Gages,  Vol.  2,  Sec.  10. 

23 


24  The  Law  of  Pledge. 

3.  Yet,  in  some  cases,  a  thing  which  the  owner  could 
not  sell,  might  be  given  in  pledge,  to  be  used  and  re- 
tained by  the  pledgee  until  redeemed  by  the  pledgeor. 
The  creditor  could  not  expect  in  that  case  to  be  paid 
from  the  proceeds  of  the  sale,  or  to  obtain  by  fore- 
closure the  ownership  of  the  pledge.  But  he  could 
have  the  use  and  benefit  of  the  thing  pledged,  if  it 
were  so  stipulated  in  the  contract,  until  the  pledge 
were  redeemed  by  payment  of  the  debt.*     < 

4.  In  the  same  manner,  a  thing  which,  by  law,  could 
not  be  seized  or  attached,  might  be  given  in  pledge 
under  the  same  stipulations.! 

In  France  the  ''''rentes  sur  T Etat "  (the  interest  on 
public  funds),  which  can  not  be  seized  and  sold,  ma}- 
be  pledged.  J 

5.  The  pledge  is  a  contract  by  which  a  debtor  de- 
livers a  thing  to  his  creditor  as  security  for  the  debt.§ 
And  the  pledge  confers  on  the  creditor  the  right  to 
cause  himself  to  be  paid  from  the  thing  pledged,  by 
privilege  and  preference  over  the  other  creditors.! 
Payment,  therefore,  from  the  proceeds  of  the  pledge 
is  ordinarily  the  object  and  the  effect  of  that  contract. 
But  it  need  not  necessarily  be  so.   The  mode  and  pro- 


*  Lanrent,  Nantisseuient,  Vol.  2S,  Sec.  44.5. 

Troplong,  Nantissement,  Sec.  52. 
t  Laurenr,*/?>(VZ.,  svpra. 
X  Pont,  Des  Petits  Contrats,  Vol.  2,  Sec.  1080. 

F.  Herman,  Code  Civil,  Art.  2071,  Xo.  14. 

Laurent,, Nantissement,  See.  445. 
§. Code  Napoleon,  Art.  2071. 

Civil  Code  of  Louisiana,  Art.  3138. 

Story,  on  Bailments,  See.  2S0. 

.Tones,  on  Pledges,  Sec.  1. 
li  Code  Napoleon,  Art.  2073. 

Civil  Code  of  Louisiana,  Art.  31.57. 


What  Things  May  Be  Pledged.  25 

cess  by  which  the  debt  is  secured  may  be  left  to  the 
choice  of  the  parties.  If  tlie  thing  pledged  could  not 
be  sold,  the  parties  might  contemplate  in  their  agree- 
ment that  the  deprivation  of  his  property  by  the 
debtor,  and  the  possession  and  enjoyment  of  it  by  the 
creditor,  if  such  enjoyment  was  permitted  by  the  con- 
tract, would  be  a  sufficient  reason  for  the  pledge ;  and 
the  consequent  inducement  to  the  debtor  to  pay  the 
debt  might  be  considered  as  the  means  of  security  in- 
tended by  the  parties. 

6.  There  is  no  limit  in  the  Civil  law  to  the  duration 
of  contracts  of  real  securityship.  As  long  as  the  debt 
secured  is  kept  alive,  such  security,  pledge  or  mort- 
gage, may  be  kept  alive  also.  The  thing  pledged 
may,  therefore,  remain  indelinitively  in  the  hands  of 
the  creditor,  if  the  pledge  is  not  redeemed.  It  may  be 
so  even  when  payment  from  the  proceeds  of  sale  is  the 
object  of  the  contract,  because  the  creditor  is  not  com- 
pelled to  demand  or  effect  the  sale  of  the  thing 
pledged."^ 

7.  As  the  possession  of  the  pledgee  is ^r^cc?;'/^'//^,  and 
not  exercised  in  the  quality  of  owner,  it  follows  that 
he  never  can,  by  the  mere  fact  of  his  possession,  ac- 
quire, through  any  lapse  of  time,  the  ownership  of  the 
thing  pledged.  And  the  converse,  if  it  be  so,  of  the 
rule  is  equally  true,  to-wit,  that  the  debtor  can  not  be 
released  from  the  debt  by  any  length  of  time,  because 
the   debtor,  by  not  redeeming  the  pletlge  and  leaving 


*  Laurent,  Du  Gage,  Sec.  516. 
.Jones,  on  Fledges,  Sees.  004  and  OOG. 


26  The  Law  of  Pledge. 

it  in  the  hands  of  the  creditor,  thereby  acknowledges 
continuously  the  existence  of  the  debt.*  The  two 
prescriptions,  acquirendi  causa  and  liberandi  causa, 
are  equally  ineffective  in  the  contract  of  pledge.  Such 
is  the  rule  of  the  Civil  law,  but  it  seems  to  be  differ- 
ent in  some  of  the  Common  law  States,  where  the 
debt  may  be  barred  by  the  Statute  of  limitations,  even 
Avhilst  the  pledge  which  secures  it  remains  in  the  hands 
.of  the  creditors. t 

But  we  will  consider  this  subject  more  at  length 
later  on. 

8.  Inasmuch  as  possession  is  the  essential  element  of 
a  pledge,  what  can  not  be  delivered,  either  actually 
or  constructively,  can  not  be  pledged,  even  if  it  can 
be  sold.t 

Hence,  it  follows  that  though  ordinarily  nothing 
can  be  pledged  that  can  not  be  sold,  some  things  can 
be  sold  that  can  not  be  pledged,  because  delivery  is 
not  of  the  essence  of  sale,  inasmuch  as  a  thing  may 
be  legally  sold  and  yet  remain  in  the  possession  of 
the  seller. 

9.  Money  itself  may  be  given  in  pledge.  Instances  of 
this  are    found   in   the  deposits   made  with   gas  light 


*  Pont,  Xantissenient,  Sec.  11(3(3. 

Laurent.  Du  Gage,  Sec.  497. 

Marcade,  Vol.  7,  p.  205. 

Conger  vs.  New  Orleans,  32  La.  Au.  1253. 

Blanc  vs.  Herzog,  23  La.  An.  199. 

Bank  vs.  Knapp,  22  La.  An.  117. 
t  .lones,  on  Pledges,  Sees.  5S1,  582  and  5S3. 

Edwards,  on  Bailments,  Sec.  249. 

Hancock  vs.  Insurance  Conipanv,  114  Mass.  156. 

Hiilbert  vs.  Clark  et  al..  128  X.  Y.  295. 
X  Laurent,  Droit  Civil,  Vol.  28,  Sees.  444.  477. 

Baudry-Lacantinerie,  Xantissenient.  Vol.  1.  p.  34.  Sec.  75. 


What  Things  May  Be  Pledged.  27 

companies,  public  or  circulating  libraries,  to  secure  the 
payment  of  their  customers'  accounts,  or  the  return  of 
the  books  borrowed  ;  and  in  the  margins  deposited 
with  brokers  as  security  for  the  sums  advanced  by 
them.* 

Could  the  creditor,  in  such  a  case,  in  default  of  pay- 
ment, retain  the  money  and  thereby  pay  himself, 
without  any  legal  proceedino-s  and  decree  of  court? 
On  principle,  the  creditor  could  have  no  such  right 
under  the  rule  that  any  agreement  which  would  au- 
thorize him  to  appropriate  the  pledge  to  himself,  in 
case  of  non-payment  of  the  debt,  would  be  null  and 
void  ;  a  rule  which  is  common  to  the  Civil  law  and  to 
the  Common  law,  as  we  will  see  hereafter. 

10.  It  was  doubtful  in  Pothier's  time  whether  in- 
corporeal things,  such  as  credits  or  claims,  could  be 
pledged.  The  reason  of  the  doubt  was  that,  under  the 
Roman  law,  incorporeal  things  could  not  be  delivered 
and  given  possession  of  to  the  pledgee  ;  hence  could 
not  be  the  subject  of  pledge. 

1 1 .  Both  in  the  Common  law  and  in  the  Civil  law 
of  the  present  time  the  question  has  been  solved  in  the 
sense  that  such  rights  and  choses  in  action  may  be 
delivered  S37mbolically  or  constructively,  and  therefore 
may  be  pledged.  The  principle  has  passed  into  legis- 
lation, in  the  Code  Napoleon  and  in  the  Civil  Code  of 
Louisiana.     The  first  provides  simply  that  the  pledge 


*  Civil  Code  of  Louisiana,  Art.  3154. 
Pothier,  Nantissement,  No.  6. 
Troplong,  Xantissement,  Xo.  55. 
Story,  on  Bailments,  Sec.  290. 


28  The  Law  of  Pledge. 

of  incorporeal  things,  such  as  claims,  credits,  etc., 
shall  be  made  by  an  act  in  writing,  authentic  or 
private,  recorded  and  notified  to  the  debtor  of  the  debt 
given  in  pledge.* 

This  act  in  writing  is  to  be  an  act  of  pledge  clearly, 
but  in  what  form  ? 

The  French  commentators  say  that  the  act  provided 
for  in  that  article  of  the  Napoleon  Code  is  an  act  of 
transfer  oi  the  incorporeal  rights,  credits  and  so  forth, 
and  that  the  delivery  and  possession  consist  in  the 
handing  of  the  title^  or  muniment  of  title,  of  the 
rights  or  credits  to  the  pledgee.  The  transfer  of 
such  rights  and  delivery  of  possession  are  provided 
for  in  both  of  the  Codes.  That  of  Louisiana,  in  two 
articles  taken  verbatim  from  that  of  France,  provides 
that:  "  In  the  transfer  of  credits,  rights  or  claims  to 
a  third  person,  the  delivery  takes  place  between  the 
transferrer  and  the  transferee  by  the  giving  of  the 
title." 

"The  transferee  is  only  possessed,  as  it  regards 
third  persons,  after  notice  has  been  given  to  the 
debtor  of  the  transfer  having  taken  place.  The 
transferee  may  nevertheless  become  possessed  by  the 
acceptance  of  the  transfer  by  the  debtor  in  an  authen- 
tic act."  f 

12.  But,  in  providing  for  the  pledge  of  such  claims, 
the   Code  of  Louisiana  is  more  particular  and  precise 


*  Code  Xapoleon,  Art.  2075. 

t  Civil  Code  of  Louisiana,  Arts.  2642,  2(543;  Code  Xapoleon,  Arts. 
1GS9,  1G90. 


What  Things  May  Be  Pledged.  29 

than  its  great  model,  and  leaves  nothing  on  this  point 
for  initerpretation  or  construction.  It  says  :  "When  a 
debtor  wishes  to  pawn  a  claim  on  another  person,  he 
must  make  a  fransfer  of  it  in  the  act  of  pledge  and 
deliver  to  the  creditor  to  whom  it  is  transferred  the 
note  or  instrument  which  proves  its  existence,  if  it  be 
under  priv^ate  signature,  and  must  endorse  it  if  it  be 
negotiable."  * 

13.  It  is  evident  that  the  transfer  in  question  is  not 
one  of  ownership,  for  it  would  not  constitute  a  pledge, 
but  a  transfer  of  the  title  only  for  the  purpose  of 
security  or  g-uarantv.  This  distinction  between  the 
transfer  ill  guaranty  for  the  purpose  of  a  pledge,  and 
the  transfer  ofozunership,  in  case  of  a  sale,  is  clearly 
shown  b}'  Professor  Baudrv-Lacantinerie,  in  com- 
mentmg  upon  this  subject. f 

14.  The  Code  of  Louisiana,  unlike  the  Code  Na- 
poleon, provides  for  the  necessity  of  notifying  the 
debtor  of  the  claim,  of  the  tran'sfer  or  pledge.  It 
enacts  that:  ''  When  the  thing  given  in  pledge  con- 
sists of  a  credit  not  negotiable,  to  enable  the  creditors 
to  enjoy  the  privilege  above  mentioned,  it  is  necessary' 
not  only  that  the  proof  of  the  pledge  be  made  by  an 
authentic  act,  or  by  an  act  under  private  signature, 
duly  recorded,  but  that  a  copy  of  this  act  shall  have 
been  duly  served  on  the  debtor  of  the  credit  given  in 
pledge."  X 


*  Civil  Code  of  Louisiana.  Art.  315G. 

t  Baudry-Lacantinerie,  Xantissem<>nt.  11.  44. 

I  Civil  Code  of  Louisiana,  Art.  3101). 


30  The  Law  of  Pledge. 

15,  In  the  Civil  law  it  is  this  notification  of  the 
transfer  of  the  claim  to  the  debtor  of  it  which  consti- 
tutes the  legal  possession  of  the  claim  by  the  trans- 
feree, whether  in  case  of  the  sale,  pledo^e,  garnish- 
ment, attachment,  or  seizure  under  execution.  The 
right  of  such  transferee,  or  attaching  or  seizing  cred- 
itor, springs  from  this  notice  to  the  debtor  of  the 
claims.* 

In  the  case  of  a  sale,  the  incorporeal  thing  or  credit 
sold  is  only  put  in  the  possession  of  the  vendee  by 
such  notice  to  the  debtor  of  the  claim,  and  until  the 
notice  has  been  given  the  claim  can  be  seized  as 
property  of  the  creditor  of  the  claim.  In  case  of  the 
pledge  of  such  credit,  the  lien,  or  privilege,  or  right 
of  preference  of  the  pledgee,  is  only  effected  by  the 
notice.  In  case  of  attachment,  garnishment  or  seiz- 
ure under  execution,  the  same  lien  or  privilege,  or 
right  of  preference  of  the  attaching  or  seizing  creditor 
is  obtained  also  b}^  means  of  the  said  notice,  and  only 
by  means  of  the  notice.  This  important  principle 
rests  upon  the  fact  that  the  right  of  preference  in 
question  depends  upon  the  transfer  or  delivery  of  pos- 
session, and  that  the  notice  to  the  debtor  of  the  credit 
is  made  by  law  constructive   possession  of  the  credit. 

16.  Troplong,  in  his  usual  happy  mode  of  expres- 
sion, states  the  principle  in  these  words:  "  It  is  this 
notice  which  informs  the  debtor  of  the  privilege  of  the 
creditor.  It  is  it  which  binds  the  debtor  to  the 
pledgee.   It  constitutes  the  mode  of  taking  of  possession 

*  Troplong,  Xantissement,  Sees.  261  et  seq. 


What  Things  May  Be  Pledged.    .  31 

proper  to  the  transfer  of  incorporeal  movable  things. 
For  it  has  always  been  a  rule  of  the  French  law  that 
the  transfer  itself  gives  no  possession,  and  that  it  is  by 
the  notice  that  the  creditor  takes  external  possession 
of  his  right."* 

17.  But  the  notice  of  the  transfer  is  only  necessar^'^ 
to  establish  the  right  of  preference  of  the  transferee 
over  third  persons  and  creditors  of  the  transferrer,  as 
shown  by  the  articles  of  the  Napoleon  Code  and  >^ude 
of  Louisiana.  Between  the  vendor  and  vendee,  and 
pledgeor  and  pledgee,  such  notice  is  not  necessary 
and  the  sale  or  pledge  of  the  incorporeal  right,  or 
credit,  is  valid  and  binding  upon  the  vendor  and 
pledgeor  without  it.  Clearly  the  vendor  and  pledgeor 
need  not  be  informed  by  notice  of  their  own  act,  and 
they  are  bound  to  their  vendee  and  pledgee  b}-  the 
contract  of  sale  or  pledge  itself. 

18.  In  the  Common  law  the  transfer  of  incorporeal 
things,  for  the  purpose  of  a  pledge,  and  for  putting 
the  pledgee  in  possession,  is  made  also  by  transferring 
or  transmitting  the  title,  or  muniment  of  title,  of  the 
claim,  credit,  or  other  incorporeal  thing  or  right ;  but 
no  notice  to  the  debtor  of  the  credit  is  required  to 
secure  the  right  of  the  pledgee  against  third  persons 
or    other    creditors.     The    mere    act   of    the   transfer 


Troplong,  Xantissement,  Sec.  265. 

Troplong,  De  la  Vente,  Vol.  2,  Sees.  882,  883. 

Pont,  Xantissement,  Sees.  1108,  1109. 

Baudry-Lacantinerie,  Du  Gage,  Sees.  57,  58,  59. 

Laurent,  Du  Gage,  Sec.  463. 

Hanna  vs.  Bry,  5  La.  An.  656. 

Monticon  vs.  Mullen,  12  La.  An.  273. 

St.  Komes  vs.  Cotton  Press  Co.,  21  La.  An.  291. 


32  The  Law  of  Pledge. 

of  the   claims  and  muniment  of  title  complete  the 
pledge. 

19.  Jones,  on  Pledges,  in  this  respect,  says:  "The 
assignment  of  a  chose  in  action  as  security  is  valid, 
without  notice  to  the  debtor  of  the  assignment.  The 
assignment  is  complete  upon  the  mutaal  assent  of  the 
parties  to  it,  followed  by  a  delivery ;  and  it  does  not 
gain  additional  validity  as  against  third  persons  by 
notice  to  the  debtor."* 

Judge  Story,  and  Mr.  Edwards  in  his  book  on  Bail- 
ments, both  speak  of  the  pledge  of  incorporeal  things 
by  transfer  to  the  pledgee ;  but  make  no  mention  of 
the  question  of  notice  to  the  debtor  of  the  credit. f 

20.  The  subject,  from  its  Common  law  view,  was 
fully  discussed  by  the  Court  of  New  York,  which 
said  :  "  It  was  not  needful  to  make  the  assignment  or 
lien  valid  and  effectual  against  Heath  and  against  his 
attacking  creditors,  that  notice  thereof  should  have 
been  given  to  the  debtors,  the  Ingersolls.  Such  notice 
was  needful  only  to  defeat  a  subsequent  bona  fide  pay- 
ment by  the  Ingersolls.  It  has  been  held  in  some 
of  the  States,  and  was  forinerly  supposed  to  be  the 
rule  in  England,  that  such  an  assignment  could  be 
valid  and  operative  only  in  case  of  and  after  notice  to 
the  debtors.  It  was  held  in  Watts  vs.  Porter  (3  E. 
and  B.  743)  that  an  assignment  of  a  mere  chose  in 
action  without  notice  to  the  debtor  was   imperative  as 


*  Jones,  on  Pledges.  Sec.  136. 
t  Story,  on  Bailments,  Sec.  290. 

Edwards,  on  Bailments,  p.  191. 

Thaver  vs.  Daniels.  113  Mass.  129. 


"What  Things  May  Be  Pledged.  33 

against  a  subsequent  judgment  debtor.  But  the  Lord 
Chancellor  and  Lords  Justices  Knight,  Bruce  and 
Turner,  in  Bearan  vs.  Earl  of  Oxford  (6  De  G.  M. 
and  G.  492),  and  the  master  of  the  rolls,  in  Kinderley 
vs.  Jervis  (22  Bear,  i),  held  a  contrary  doctrine  ;  and 
in  Dickering  vs.  the  Ilfracombe  Railway  Co.  (L.  R. 
3,  C.  P.  235),  Bovill,  Ch.  J.,  and  Willes,  J.,  agreed 
with  the  latter  authorities.  Still  later,  in  Robinson 
vs.  Nesbitt  (L.  R.  3,  C.  P.  264),  the  case  of  Watts 
vs.  Porter  was  directlv  overruled,  and  it  was  held  that 
a  prior  equitable  assignment  of  railway  shares  in 
the  hands  of  a  garnishee  was  a  bar  to  an  attach- 
ment, notwithstanding  that  no  notice  of  such  assign- 
ment had  been  given  to  the  garnishee.  In 
Stevens  vs.  Stevens  (i  Ashmead,  190),  it  was  held 
that  the  assignment  of  a  debt  due  by  a  third  person 
was  a  good  equitable  transfer  of  such  a  debt  as  against 
a  subsequent  attaching  creditor,  notwithstanding  no 
notice  of  such  assignment  was  given  to  the  debtor 
until  after  the  attachment.  In  United  States  vs. 
Vaughan  (3  Binney,  394),  a  similar  decision  was 
made,  and  it  was  further  held  that  the  plaintiff  in  a 
foreign  attachment  stands  upon  no  better  footing  as  to 
the  thing  attached  than  his  debtor,  the  defendant  in 
the  attachment.  In  Dix  vs.  Cobb  (4  Mass.  508J, 
Parsons,  C.  J.,  said:  "Although  the  trustee  in  this 
case  had  no  notice  of  the  assignment  until  after  he 
was  sued  as  trustee,  yet  immediately  on  the  assign- 
ment the  equitable  interest  in  the  debt,  as  between  the 
parties  to  it,  immediately  passed  to  the  assignee.   And 


34  The  Law  of  Pledge. 

if  the  assignor  had  afterward  recovered  the  debt,  he 
would  be  obliged  to  pay  it  over  to  the  assignee.  But 
an  attaching  creditor  can  not  stand  on  a  better  footing 
than  his  debtor  (if  the  assignment  be  not  fraudulent 
as  to  creditors),  and  if  he  attaches  an}^  property  of  his 
debtor,  it  must  be  attached  subject  to  all  lawfully  ex- 
isting liens  created  by  his  debtor.  And  consequently, 
if  his  debtor  has  no  equitable  interest  in  a  chose  in 
action^  the  creditor  can  not  acquire  any  by  his  attach- 
ment." In  Muir  vs.  Schenck  (3  Hill,  228),  it  was 
held  that,  as  between  different  assignees  of  a  chose  in 
action  by  express  assignment  from  the  same  person, 
the  one  prior  in  point  of  time  will  be  protected,  though 
he  has  given  no  notice  to  either  the  subsequent  assign- 
ees or  the  debtor,  and  the  question  between  a  previous 
assignee  and  a  subsequent  attaching  creditor  was  con- 
sidered the  same  in  principle  as  that  between  conflict- 
ing assignees.  However  much  that  case  may  have 
been  criticised  elsewhere,  it  has  been  considered  well 
decided  in  this  State.  It  was  cited  with  approval  in 
Greentree  vs.  Rosenstock  (61  N.  Y.  583),  and  Freund 
vs.  The  Imp.  &  Tr.  Nat.  Bank  (76  Id.  352)."* 

21.  We  must  bear  in  mind,  in  considering  the  sub- 
ject of  the  pledge  of  incorporeal  things,  that  it  is  only 
the  movable  incorporeal  things  that  can  be  pledged. 
And,  in  case  of  the  pledge  of  an  immovable  incor- 
poreal thing,  the  pledgeor  himself,  beside  his  credit- 
ors, can  demand  the  nullity  of  the  contract.  The 
principle  is  not  the  same  as  in  the  case  of   a  pledge 

♦  Williams  tt  al.  vs.  Ingersoll  et  a?.,  89  X.  Y.  522  and  .523. 


What  Things  May  Be  Pledged.  35 

given  without  a  written  act,  which  is  binding  on  the 
pledgeor,  though  not  upon  third  persons.  The  pledge 
of  immovable  property  being  no  pledge  at  all,  can  not 
bind  the  parties. 

This  was  decided  by  the  French  courts.* 

22.  Troplong,  speaking  of  the  article  of  the  Napo- 
leon Code  which  provides  that  incorporeal  things  ma}^ 
be  pledged,  says:  "Our  article  2075  only  covers  the 
pledge  of  incorporeal  movables.  It  follows  hence  that 
if  the  debtor  gave  the  creditor  a  real  right  in  pledge, 
the  latter  would  obtain  no  privilege."  f 

Troplong  seems  to  be  the  only  one  of  the  French 
commentators  whose  attention  has  been  drawn  to 
this  point ;  but  he  himself  should  have  distinguished 
between  real  rights  which  are  movable  and  those 
which  are  immovable.  A  movable  real  right  may 
clearly  be  the  subject  of  a  pledge. 

Demolombe  says  :  "Real  rights  can  therefore  be 
movable  as  well  as  immovable.  In  the  same  manner 
that  personal  rights  can  be  immovable  as  well  as 
movable.  Pothier,  Introduct.  Gen^r.  aux  Cont., 
Nos.  no,  112  et  119."  \ 

The  usufruct  of  real  estate,  for  instance,  being  an 
incorporeal  immovable,  could  not  be  pledged ;  whilst 
the  usufruct  of  personal  property  or  movables,  may 
perfectly  well  be  the  subject  of  a  pledge. § 


*  Dalloz,  36,  2.  76. 
t  Troplong,  Du  Gage,  Sec.  295. 

X  Demolombe,  Distinction  des  Biens,  Vol.  1,  Sec.  465. 
§  Civil  Code  of  Louisiana,  Art.  471. 
Code  Napoleon,  Art.  526. 


36  The  Law  of  Pledge. 

24.  On  tliis  subject  we  must  distinguish  between 
the  pledge  of  the  usufruct  of  property  and  the  pledge 
of  the  property  itself.  Let  us  take  for  instance  the 
case  of  the  pledge  of  corporate  stock.  The  pledgee 
may  have  the  stock  itself  sold  to  satisfy  his  debt.  But 
in  the  case  of  the  pledge  of  the  usufruct  of  the  same 
stock,  the  pledgee  can  have  the  usufruct  sold  for  the 
same  purpose  ;  but  he  can  not  reach  the  stock  itself. 
Upon  that  he  has  no  right,  because  it  is  not  the  stock 
which  is  pledged,  but  the  mere  usufruct  of  it. 

In  the  same  manner  the  usufruct  of  real  estate  may 
be  mortgaged,  in  the  Civil  law,  because  it  is  an  incor- 
poreal immovable  ;  but  the  mortgagee,  in  that  case, 
could  only  foreclose  upon  the  usufruct  itself  and  have 
it  seized  and  sold ;  but  he  could  not  reach  the  real 
estate  by  virtue  of  his  mortgage. 


CHAPTER    III. 

Things   in  Expectancy,  or  which    have   a    mere 
Potential  Existence. 

25.  Such  things  can  not  be  pledged,  thougli  they 
may  be  sold,  as  animals  yet  unborn,  fish  yet  uncaught, 
crops  yet  un grown,  etc.* 

These  principles  govern  both  the  Civil  law  and  the 
Common  law.f 

Yet,  when  animals  are  given  in  pledge,  their 
young  born  during  the  pledge  form  part  of  it,  though 
they  were  not  in  existence  when  the  contract  was 
entered  into.  But  this  is  the  effect  of  the  principle 
that  the  fruits  of  the  thing  pledged  become  part  of  the 
pledge.J 

26.  A  case  arose  in  Louisiana,  in  which  there  was 
a  written  agreement  between  a  planter  and  his  com- 
mission merchant,  the  former  -pledging  his  growing 
crop  to  the  latter  as  security  for  his  advances.  The 
Court  held  that  the  crop  in  expectancy  could  not  be 
delivered  at  the  movement  of  the  pledge,  and,  there- 
fore, could  not  be  pledged. 


*  Civil  Code  of  Louisiana,  Arts.  2450-2451. 

Troplong,  Vente,  Vol.  I,  Sec.  203. 

Baudry-Lacantinerie,  Nantissement,  Sec.  30. 
t  Tiedeman,  on  Sales,  Sec.  52. 

Benjamin,  on  Sales,  Sec.  78. 
X  Pont,  Des  Petits  Contrats,  Vol.  II,  Sec.  1080. 

Baudry-Lacantinerie,  Nantissement,  Sec.  96. 

.Jones,  on  Pledges,  Sec.  32. 

Schouler,  on  Bailments,  Sec.  200. 

Story,  on  Bailments,  Sec.  292. 
37 


38  The  Law  of  Pledge. 

The  Court  said  :  "  Property  in  expectancy  maybe 
the  object  of  a  contract  of  sale,  because  that  contract  is 
complete  by  the  mere  consent  of  the  parties.  But  itcan 
not  be  the  subject  of  a  contract  of  pledge,  because  that 
contract  is  what  the  civilians  call  a  real  contract ;  one 
which  is  not  perfected  by  the  consent  of  the  parties, 
but  which  requires  the  delivery  of  the  thing  pledged."* 

27.  This  case  was  decided  under  the  legislation  of 
Louisiana  as  it  then  stood,  and  under  the  general 
principles  of  the  law  of  pledge  ;  but  subsequently  an 
act  of  the  Legislature  of  that  State  was  passed  to  ena- 
ble the  planters  to  pledge  their  g'rowing- crops  in  favor 
of  their  commission  merchants,  to  secure  advances  of 
money,  as  if  the  -pledgees  were  in  -possession  of  the 
crops.  The  formalities  necessary  for  such  pledge  con- 
sist in  a  written  agreement  of  pledge  and  the  recording 
of  the  same  in  the  office  of  Mortgages  of  the  parish 
or  county,  where  the  crops  are  raised. f  This  is  a 
pledge  sui generis,  created  by  special  law  and,  there- 
fore, taken  out  of  the  general  principles  which  pre- 
scribe that  no  pledge  is  valid  without  actual  possession. 

28.  As  delivery,  and  thereby  possession,  to  the 
pledgee,  is  of  the  essence  of  the  contract  of  pledge, 
it  is  evident  that  property  in  fiituro,  or  which  has 
only  a  potential  existence,  can  not  be  pledged,  because 
it  can  not  be  delivered. J      It  is,    therefore,  curious  to 


*  Hagan  vs.  Sompayrac,  3  La.  154. 

t  Acts  of  the'Legislature  of  Louisiana,  of  the  year  1S74,  ]>.  IM. 

X  Pont,  Nantissement,  Sec.  1080. 

Baudry-Lacantinerie,  Nantissement,  Sec.  3(j. 

Troplong.  Nantissement,  Sec.  29H. 

Laurent.  I)u  Gage,  Sec,  469  et  seq. 

F.  Herman,  Code  Civil.  Art.  2073,  No.  :^n. 


What  Things  May  Be  Pledged.  39 

observe  the  error  into  which  a  law  writer  of  such  high 
authority  as  Judge  Story  lias  fallen  on  that  subject  in 
respect  to  the  Civil  law.  In  his  commentaries  on  Bail- 
ments, Chapter  V,  on  Pawns  or  Pledges,  Sec.  294,  he 
says : 

"  In  the  Civil  law,  not  only  property,  of  which  the 
party  was  at  the  time  in  possession,  or  to  which  he 
had  then  a  present  title,  might  be  pledged ;  but  prop- 
erty, of  which  he  had  neither  possession  nor  title,  and 
which  should  be  acquired  by  him  in  futuro.  And 
when  the  title  was  so  acquired  in  futuro  the  right  of 
the  pledgee  attached  immediately  upon  it.  But,  in 
such  cases,  it  was  more  properly  an  hypothecation 
than  a  pledge.  In  our  law  a  pledge  is  strictly  con- 
fined to  property,  of  which  there  may  be  a  present 
possession  or  title,  or  in  which  there  is  a  present 
vested  right."  And  Judge  Story  cites  Domat  and  the 
Digest  in  support  of  this  extraordinar}-  statement,  or 
rather  he  finds  in  Domat  a  note  of  the  law  of  the 
Digest  on  this  point. 

29.  But  Domat  does  not  say  so,  nor  does  the  Digest. 
The  passages  in  both  of  them  cited  by  Judge  Story 
apply  to  the  mortgage,  and  not  to  the  pledge,  of 
future  property.  By  the  Roman  law,  by  the  French 
law,  by  the  Civil  law,  as  well  as  by  the  Common  law, 
property  may  be  mortgaged  by  a  person  who  has  only 
an  expectant  title  and  the  mortgage  will  attach  when 
the  title  vests  in  the  mortgageor.  And  it  is  so  of  the 
mortgage,  because  possession  in  the  mortgagee  is  not 
necessary. 


40  The  Law  of  Pledge. 

The  words  of  Domat,  as  we  find  them  in  Cushing's 
Edition,  are  as  follows  : 

'■''Mortgage  on  an  Estate  to  Come. — Those  who 
bind  themselves  by  any  engagement  whatsoever 
may,  for  the  security  of  their  performance  of  the 
engagement  on  their  part,  appropriate  and  mortgage, 
not  only  the  estate  they  are  masters  of  at  the  time  of 
contracting,  but  likewise  all  the  estate  which  they 
shall  be  afterward  seized  or  possessed  of.  And  this 
mortgage  extends  to  all  the  things  which  they  shall 
afterward  acquire  that  are  capable  of  being  mort- 
gaged by  what  title  soever  it  may  be  that  they 
acquire  them,  and  even  to  those  which  are  not  in 
being  when  the  obligation  is  contracted ;  so  that  the 
fruits  which  shall  grow  upon  the  lands  will  be  com- 
prehended in  the   mortgage  of  an  estate  to  come."  * 

30.  The  words  of  Domat,  in  the  text,  are  :  ''Ceux 
qui  s'obligent  a  quelque  engagement  que  ce  puisse 
etre,  peuvent  y  affecter  et  hypothequer,  non  seule- 
ment  leurs  biens  presents,  mais  encore  tous  leurs 
biens  k  venir;  ce  qui  s'^tend  c\  toutes  les  choses 
qu'on  pourra  acquerir  dans  la  suite,  qui  seront  sus- 
ceptibles  de  I'hypotheque,  a  quelque  titre  qu'on 
puisse  les  acquerir,  et  a  celles  meme  qui  ne  sont  pas 
encore  en  nature  quand  on  s'oblige;  ainsi  les  fruits 
qui  pourront  naitre  des  heritages,  seront  compris  dans 
I'hypotheque  des  biens  k  venir."  f 

31.  The  words  of  the  Digest  in  the  paragraph  cited 
by  Domat  and  by  Judge  Story  are  as  follows : 


♦  Domat,  Cushing's  Ed.,  p.  649,  No.  1G61. 
t  Domat,  Vol.  2,  Gages  et  Hj-poth.  No.  5. 


What  Things  May  Be  Pledged.  41 

"Et  quae  nondum  sunt  futura  tamen  sunt  hypothecce 
dari  possunt ;  ut  fructus  pendentes,  partus  ancillos, 
fcetus  pecorum  et  ea  quai  nascuntur  sint  hypothecse 
obligata."  * 

There  is  no  mention  of  the  pledge  in  eitlier  place, 
but  of  the  mortgage. 

It  is  true  that  the  pledge  and  the  mortgage  of  the 
Roman  law,  as  we  have  seen  before,  were  for  a  time 
confounded  together  in  many  respects,  but  when  the 
Digest  was  compiled  in  the  sixth  century  of  the 
Christian  era  the  Roman  law  had  reached  that  high 
degree  of  perfection  which  has  not  been  surpassed  by 
modern  legislation,  and  the  distinction  between  the 
two  modes  of  real  securities  was  well  established. 

32.  The  great  commentator  of  the  Napoleon  Code, 
Troplong,  who,  perhaps,  among  the  brilliant  array  of 
those  admirable  French  expounders  of  the  Civil  law, 
has  written  the  best  and  most  complete  treatise  on 
Pledge,  says  in  that  respect : 

"  L'hypoth^que  entra  done  dans  la  jurisprudence 
romaine  sous  son  nom  grec.  Variete  du  pignus^  elle 
differait  cependant  du  -pignics  proprement  dit,  en  ce 
que  le  -pignus  etait  livre  au  creancier,  tandisque  la 
chose  hypothequee  restait  aux  mains  du  debiteur.'* 
And  he  cites  the  Roman  jurisconsult  Ulpian,  whose 
words  are  consecrated  in  the  Digest :  "  Proprie  pignus 
decimus  quod  ad  creditorem  transit;  hypothecam 
cum  non  transit  nee  possessio  ad  creditorem."  f 


*  Digest,  L.  1,  De  pign.  et  hyp. 

t  Troplong,  Du  Xantissement,  p.  14. 


42  The  Law  op  Pledge. 

33.  Troplong  explains  also  the  apparent  confusion 
of  the  Roman  law  on  the  similarity  of  the  mortgage 
and  the  pledge  alluded  to  by  the  jurisconsult  Mar- 
•cianus  in  the  words :  Inter  -pignus  et  hypothecam 
tantu?n  notnitiis  sonus  differt.  The  French  com- 
mentator says  of  this  maxim  :  "This  proposition  is 
only  true  in  a  restricted  sense,  and  that  is,  only  so  far 
as  the  mortgage  and  the  pledge  belonged  to  the  sub^- 
ject  of  real  securities.  But,  in  other  respects,  the 
mortgage  differed  considerably  from  the  pledge  ;  and 
it  differed  from  it,  not  only  by  the  name,  but  also,  and 
especially,  because  it  left  to  the  debtor  the  possession 
which  the  pledge  took  away  from  him."* 

34.  Domat  himself  indicates  clearly  the  difference 
between  the  mortgage  and  the  pledge,  in  the  French 
law,  and  consequently  that  his  words  on  the  mortgage 
of  property  i7i  futui-o  do  not  apply  to  the  pledge. 

He  sa3's  in  his  Art.  I :  "  But  the  wov<\ pawn  is  more 
properly  applied  to  movable  things,  which  are  put 
into  the  hands  and  keeping  of  the  creditor ;  and  the 
word  mortgage  signifies  properly  the  right  acquired 
by  the  creditor  upon  the  immovables  which  are  ap- 
propriated to  him  by  his  debtor,  although  he  be  not 
put  into  possession  of  them." 

Indeed,  as  possession  is  the  essential  and  indis- 
pensable condition  of  the  pledge  in  the  Civil  law  as 
well  as  in  the  Common  law,  it  is  impossible  to  con- 
ceive how  property  not  yet  in  existence,  and,  there- 
fore, not  susceptible  of  delivery,  can  be  pledged. 


Troplong,  Xantissement,  page  9. 


What  Things  May  Be  Pledged.  43 

35.  The  mistake  of  Judge  Story  is,  therefore, 
hardly  justifiable,  and  would  lead  the  law  student  into 
a  grave  error.  But  the  notions  of  Judge  Story  on 
the  subject  of  the  pledge  of  the  Civil  law  are  frequently 
found  to  be  erroneous,  and  he  is  evidently  not  the 
safe  pfuide  in  such  matters  that  he  is  in  the  Common 
law.  For  instance,  he  says,  also:  "  There  are  few 
cases,  if  any,  in  our  law,  where  an  hypothecation,  in 
the  strict  sense  of  the  Civil  law,  exists ;  that  is,  a 
pledge  without  possession  by  the  pledgee. 

"  In  the  Civil  law,  although  a  delivery  of  the  thing 
took  place  in  cases  of  strict  pledge,  pigiius^  yet,  as 
has  been  already  stated,  in  the  case  of  an  hypotheca- 
tion, no  such  delivery  or  possession  was  necessary. 
An  hypothecation  had  a  complete  effect  to  transfer 
and  vest  a  title  in  the  thing,  if  that  was  the  intention 
of  the  parties  upon  the  mere  execution  of  the  contract, 
although  no  possession  was  given,  or  it  was  even  stip- 
ulated not  to  be  given."* 

36.  The  statement  of  the  great  American  jurist  on 
this  subject  is  not  sufficiently  precise.  What  he  says 
here  of  the  Civil  law,  meaning  the  Roman  law,  is 
only  true  of  the  antiquities  of  the  Roman  law,  when, 
by  the  mancipatio  per  res  et  libram,  accompanied  by 
the  fidzicia,  the  contract  of  security  took  the  form  of 
a  sale,  transferring  the  property  of  the  thing  condi- 
tionally to  the  creditor,  under  a  promise  from  him  to 
return  it  to  the  debtor  on  payment  of  the  obligation. 
This  was  a  kind  of  sale  with  the  right  of  redemption, 


*  Story,  Bailments,  Sees.  2SS,  298. 


44  The  Law  of  Pledge. 

strongly  resembling  the  mortgage  of  the  Common 
law.  But  this  primitive  contract  of  security  had  dis- 
appeared when  the  Roman  law  reached  its  high  degree 
of  improvement,  and  was  replaced  by  the  -pigtitts  and 
the  hypotheca,  in  neither  of  which  the  title  of  the  thing 
pledged  or  mortgaged  was  transferred,  even  condi- 
tionally, to  the  creditor.  The  theory  of  the  legal  title, 
or  qualified  propert}-,  transferred  to  the  mortgagee,  or 
pledgee,  under  condition,  is  a  theory  of  the  Common 
law,  and  is  contrary  and  repulsive  to  the  Civil  law.'* 

37.  Without  desiring  to  constitute  myself  a  critic  of 
Judge  Story's  views  of  the  Civil  law,  as  the  object  of 
this  book  is  to  help  the  student  to  understand  its  prin- 
ciples in  the  contract  of  pledge,  I  am  constrained  to 
notice  another  of  his  grave  errors.  He  saj's  of  the 
pledge  of  incorporeal  things :  "  But  in  the  Civil  law, 
and  French  law,  Pothier  seems  to  think  that  incor- 
poreal things,  such  as  choses  in  action,  are  not  deemed 
to  be  strictly  capable  of  being  conveyed  in  pledge. 
However,  they  are  capable  by  assignment  of  being 
effectively  used  for  the  same  purpose.  And  it  may 
perhaps  be  doubted  if  Pothier' s  opinion  is  sustained 
by  the  Civil  law  in  its  full  extent."  f 

We  must  observe,  first,  that  Pothier  does  not  seem 
to  think,  but  says  positively  that  incorporeal  things 
can  not  be  pledged  because  the}^  can  not  be  delivered 
to  the  pledgee.  "In  regard  to  incorporeal  things, 
such  as    credits,    they   are    not    susceptible    of    being 

*  Troplong,  Nantissement,  Sec.  5. 

Ortolan.  Instituts,  p.  205  and  p.  m7. 
t  Story,  Bailments,  Sec.  290. 


What  Things  May  Be   Pledged.  45 

pledged  because  they  can  not  be  delivered,  which  is 
of  the  essence  of  this  contract,"  * 

But  in  the  very  note  to  this  paragraph,  both  of 
which  are  cited  by  Judge  Story,  Pothier  says  that 
since  the  publication  of  his  book  he  has  been  in- 
formed that  the  French  jurisprudence  has  been 
changed  on  the  subject,  and  that  the  pledge  of  in- 
corporeal things  has  been  recognized  as  valid  by  the 
court. 

Whatever  the  French  law  was  in  Pothier's  time, 
the  Code  Napoleon,  promulgated  in  1803  and  1804, 
provided  specifically  for  the  pledge  of  incorporeal 
things,  and  when  Judge  Story  wrote  his  book,  in  1832, 
he  had  every  means  of  enlightenment  on  the  subject. f 

38.  It  would  seem  that  the  remark  on  his  want  of 
sufficient  precision  on  the  subject  of  the  Roman  law 
of  pledge,  made  by  an  English  writer,  is  not  unmer- 
ited. Sir  William  Markby  says  of  him:  "As  to  the 
Roman  law  of  plegde,  at  any  rate,  Story's  knowledge 
appears  to  me  to  be  incomplete."  J 

This  author  states,  which  is  ver}'  true,  that  Judge 
Story  relies  chiefly  in  questions  of  Roman  law  upon 
Domat  and  Pothier,  but  that  the  labors  of  these 
great  men  have  been  long  ago  eclipsed  by  later 
discoveries. 


*  Pothier,  Nantissement,  Sec.  (». 

t  Code  Napoleon,  Art.  2075. 

i  Elements  of  Law.  p.  214,  Sec.  435. 


CHAPTER  IV. 

39.  In  the  modern  Civil  law  there  can  be  no  con- 
fusion of  the  mortgage  and  the  pledge,  as  the  mort- 
gage never  applies  to  personal  property.  But  there 
is  still  evidently  some  confusion  on  that  subject  in  the 
Common  law,  and  the  proof  of  it  lies  in  the  fact  that 
the  courts  of  the  Common  law  States  are  frequently 
called  upon  to  decide  whether  a  contract  of  security 
between  creditor  and  debtor  is  a  mortgage  or  a  pledge. 

The  confusion  between  the  two  contracts  has  been 
the  subject  of  remarks  by  the  Courts  and  the  text 
writers.* 

40.  In  a  recent  case,  to  which  we  alluded  in  our 
Introduction,  the  Supreme  Court  of  the  United  States, 
passing  upon  a  contract  of  that  sort,  said : 

*'As  the  verbal  mortgage  or  pledge  included  all  the 
cattle,  and  was  accompanied  by  delivery,  it  was  good, 
at  least  as  against  the  defendants,  irrespective  of  any 
question  of  notice.'' f 

Does  the  Court  mean  to  say  that  a  verbal  mortgage 
or  a  pledge  is  the  same  thing?  Can  there  be  a  verbal 
mortgage?  Or  is  it  that,  in  that  case,  it  was  doubtful 
whether  the  contract  was  a  chattel  mortgage  or  a 
pledge  ? 


•  Thompson  vs.  Dolliver.  132  Mass.  103. 

Jones,  on  Pledges,  Sec.  4. 

Ante,  p.  12. 
t  Means  vs.  Bank  of  Randall,  14G  U.  S.  628. 

Ante,  p.  13. 
47 


48  The  Law  of  Pledge. 

In  the  Civil  law,  such  uncertainty  in  the  language 
of  the  Court  would  be  subject  to  criticism. 

41.  There  is  in  respect  of  the  pledge  of  future  prop- 
erty no  difference  between  the  Civil  law  and  the  Com- 
mon law,  inasmuch  as  under  both  systems,  deliver}^ 
of  the  pledge  to  the  pledgee  is  a  condition  sine  qua  non 
of  the  validity  of  the  pledge.  There  may  be  in  some 
cases  an  agreement  to  pledge  future  property,  which 
becomes  effective  whenever  the  property  rises  into 
actual  existence ;  but  there  is  in  such  cases  no  pledge 
at  the  moment  the  contract  is  formed,  because  no 
delivery  is  then  possible,  even  fictitiously.  There  is  in 
such  cases  a  promise  of  pledge,  which  may  be  en- 
forced by  action,  but  there  is  no  pledge,  and,  there- 
fore, no  security  resulting  from  it.'^ 

42.  Legislation  may,  of  course,  create  certain 
pledges  sui  generis^  by  virtue  of  which  future  property 
may  be  pledged,  such  as  the  laws  of  some  agricultural 
States  which  provide  that  the  crop  of  a  farm  or  plan- 
tation, even  before  rising  into  existence,  may  be 
pledged  to  secure  loans  of  money  or  supplies  used  in 
making  the  crop.  Such  cases  are  taken  by  special 
laws  out  of  the  general  principle  of  the  law  of  pledge.f 
Such  special  pledges  do  not  change  the  rules  govern- 
ing contracts  of  pledge  generally. 

43.  It  is  true  that  the  debtor  may  pledore  property 
which  does  not  belong  to  him,  if  he  can  deliver  it  at 


*  Laurent,  Vol.  28,  p.  464. 

Jones,  on  Pledges,  Sees.  28  and  29. 

D'Meza's  Succession,  26  La.  An.  35. 

Baudry-Lacantinerie,  Nant-issement,  Sec.  36. 
t  Ante^  p.  38.     Hagan  V3.  Sompayrac,  3  La.  154. 


What  Things  May  Be  Pledged.  49 

the  moment  of  the  pledge,  and  the  agreement  will 
become  final,  and  the  right  of  the  pledgee  will  attach 
I'etroactively  at  that  time,  if  thereafter  the  pledgeor 
becomes  the  owner  of  the  property;  but  this  rests  on 
a  different  principle,  and  depends  upon  the  rules  of 
estoppel,  which  will  not  allow  the  pledgeor  to  den}- his 
obligation  and  his  declaration  that  the  property 
belonged  to  him.  The  same  doctrine  applies  to  the 
mortgageor  of  property,  which  at  the  time  of  the 
morto-a^e  did  not  beJonsj  to  him. 

44.  The  true  owner  in  such  cases,  if  he  has  not  con- 
sented to  the  pledge  or  mortgage  of  his  property,  and 
thii'd  persons,  if  they  are  thereby  injured,  may  attack 
the  validity  of  the  transaction,  but  until  they  do,  the 
pledgee  or  mortgagee  may  have  the  benefit  of  it,  and 
is  safe  from  any  denial  of  ownership  by  the  pledgeor 
or  mortgageor.* 

45.  But  such  is  not  the  law  in  France  and  the  coun- 
tries of  continental  Europe  which  have  followed  her 
legislation.  There,  under  the  principle  that  the  pos- 
session of  personal  property  is  equivalent  to  title,  the 
pledgee  in  good  faith  can  not  be  disturbed  even  by 
the  true  owner  of  property  fraudulently  disposed  of. 
This  feature  of  the  French  law  of  pledge  will  be  the 
subi'?ct  of  another  chapter. 

Can  Rights  of  Inheritance  be  Pledged? 

46.  We  must  first  distinguish  between  the  rights 
of  an   heir  which   have  already  accrued  by  the  death 


'  Civil  Code  of  Louisiana,  Arts.  3144  and  3304 

Jones,  on  Pledges,  Sec.  52. 


50  The  Law  of  Pledge. 

of  the  ancestor,  relation  or  testator,  and  the  mere  ex- 
pectant and  eventual  rights  of  a  presumptive  heir 
before  the  death  of  the    ancestor,  relation  or  testator. 

By  the  Civil  law  the  heir  can  not  dispose  by  con- 
tract of  his  expectant  rights  of  inheritance  whilst  the 
ancestor,  relation  or  testator  is  alive,  even  with  his 
consent.  The  proMbition  is  based  upon  reasons  of 
morality  and  public  policy,  and  consequently  all  such 
contracts  of  the  heir,  whether  by  sale,  exchange,  lease 
or  pledge,  are  invalid  and  of  absolute  nullit}\ 

"There  are  things,"  says  Pothier,  "which  it  is  against 
decency  and  good  morals  to  expect,  such  as  a  future 
succession,  which  one  can  not  expect  without  hoping 
for  the  death  of  the  person  that  will  realize  the  expec- 
tation, which  morality  does  not  permit."  * 

A  guilty  hope  might  suggest  criminal  thoughts. 
Such  agreements  are,  therefore,  contrary  not  only  to 
good  morals  but  also  to  public  order.  The  Court  of 
Cassation  so  held  :  "  The  agreement  by  which  the 
eventual  rights  of  an  heir  in  the  succession  of  a  living- 
person  are  the  subject  of  a  bargain,  being  prohibited 
by  the  Arts.  791,  ii3oand  1600  of  the  Civil  Code, 
must  necessarily  be  placed  among  the  contracts  which 
are  contrary  to  good  morals  and  public  order."  f 

This  principle  comes  from  the  Roman  law,  but  the 
modern    Civil   law  has   rendered  the  rule   even  more 


*  Pothier,  Des  Obligations.  Sec.  132;  De  la  Veate   Sec   527 
t  Dalloz,  1846,  1,  25. 

Laurent,  Des  Obligations,  Sec.  84. 

Troplong,  De  la  Vente,  Vol.  I,  Sec.  246. 

Toullier,  Droit  Civil,  Vol.  6,  See.  115  ef  seq. 

Duranton,  Droit  Civil,  Vol.  10,  Sees.  310  311 

Marcade,  De  la  Vente,  Vol.  6,  p.  211, 


What  Things  May  Be  Pledged.  51 

rigid.  By  the  Roman  law  the  prohibition  was  only 
applied  to  contracts  of  the  kind  entered  into  by  the 
contracting  parties  without  the  consent  of  the  person 
whose  succession  was  the  subject  of  the  contract. 
With  the  consent  of  that  person  the  law  did  not  for- 
bid the  agreement,"^ 

47.  The  Code  Napoleon  and  the  Civil  Code  of 
Louisiana  prohibit  such  stipulations  even  in  the  con- 
tract of  marriage,  the  most  favored  of  all  contracts 
under  the  Civil  law.  f 

By  the  Civil  law,  therefore,  it  is  clear  that  rights  of 
inheritance  can  not  be  the  subject  of  the  contract  of 
pledge  when  such  rights  have  not  yel  accrued  to  the 
heir  by  the  death  of  the  ancestor  or  testator. 

48.  It  is  not  so  in  the  Common  law.  Here  the  two 
great  systems  of  law  of  the  civilized  world  differ, 
where  they  seldom  do,  in  the  fundamental  principles 
of  morality  and  public  order.  The  right  of  the  expect- 
ant or  presumptive  heir  to  dispose  by  contract  of  his 
eventual  rights  in  the  estate  of  his  ancestor,  whilst 
this  one  is  yet  alive,  has  been  recognized  and  sanc- 
tioned by  the  courts  of  England  and  of  this  country ; 
and  that  jurisprudence  has  been  firmly  established  by 
numerous  authorities  of  the  highest  order.  The  ques- 
tion of  good  morals  and  public  policy  has  not  even 
been  raised  or  considered  in  the  cases  in  which  the 
principle  has  been  declared.  The  subject  has  been 
examined  by  the  courts  simply  as  a  matter  of  the  suf- 


*  L.  30,  C,  De  Pactis;    Laurent,  loc.  cit. 
t  Code  Napoleon,  Arts.  791,  1130  and  1600. 
Civil  Code  of  Louisiana.  Arts.  979,  1015,  1887,  2327,  2454. 


52  The  Law  of  Pledge. 

ticiency  of  interest  in  the  heir  to  form  the  considera- 
tion of  a  contract,  and  for  a  court  of  equity  to  enforce  it. 

49.  Judge  Story  says  in  this  respect :  "  So,  even 
the  naked  possibiUt}'  or  expectancy  of  an  heir  to  his 
ancestor's  estate  may  become  the  subject  of  a  contract 
of  sale  or  settlement,  and  in  such  case,  if  made  bo7ia 
fideiox  a  valuable  consideration,  it  will  be  enforced  in 
equity  after  the  death  of  the  ancestor — not,  indeed,  as 
a  trust  attaching  to  the  estate,  but  as  a  right  of  con- 
tract.'' * 

In  Spence's  Equity  Jurisprudence,  the  same  doctrine 
is  stated  in  the  following  manner  :  '"A  naked  possibility 
or  expectancv  of  an  heir  to  his  ancestor's  estate,  or 
even  of  the  anticipated  right  of  a  person  or  next  of 
kin,  may  be  the;  subject  of  a  contract  in  equity  which 
will  be  equivalent  to  an  assignment  of  the  property, 
if,  and  when,  into  possession. "f 

Modern  English  statutes,  as  well  as  the  American 
legislation,  have  changed  the  Common  law  so  as  to 
permit  the  assignment  at  laiu  of  contingent  and 
future  interests,  expectancies  and  possibilities,  coupled 
with  an  interest,  in  many  cases,  either  of  real  estate  or 
of  personal  propert}-.  But  the  jurisdiction  of  equit}' 
continues  to  be  exclusive  over  all  other  assignments  of 
contingent,  future,  expectant  interests  and  possibilities 
not  embraced  within  the  statutes.! 


*  Story.  Eq.  Jurisp.   Vol.  2.  Sec.  1040. 

t  Spence,  Eq.  Jurisp.,  Vol.  2,  p.  865. 

X  Pomroy,  Eq.  Jurisp.,  Vol.  3,  Sec.  1285  et  seq. 

Fonblanque,  Equity,  p.  213. 

Hobson  vs.  Trevor,' 2  Peere  Williams,  191. 

Miller  vs.  Emans,  19  X.  Y.  384. 


What  Things  May  Be  Pledged.  53 

50.  Such  being  the  Common  law,  can  the  expect- 
ant rights  of  an  heir  be  pledged?  It  is  evident  that, 
strictly  speaking,  they  can  not  be,  inasmuch  as  pos- 
session of  the  thing  pledged  could  not  be  transferred 
to  the  pledgee.  But  all  the  effects  of  a  pledge  might 
be  given  to  contracts  in  which  an  heir,  to  secure  his 
debt,  would  give  to  the  creditor  a  power  of  attorney, 
irrevocable  and  coupled  with  an  interest,  to  ask,  de- 
mand, sue  for  and  recover  all  such  interest,  estate, 
property  and  effects,  real  and  personal,  as  he  then,  or 
at  any  time  thereafter,  might  have  or  claim  as  heir  at 
law,  devisee,  legatee  or  next  of  kin  of  his  father, 
and  apply  the  same  to  the  payment  of  the  debt. 

51.  In  such  a  case,  the  Supreme  Court  of  New 
York,  not  only  recognized  the  validity  of  the  agree- 
ment, but  decided  that  the  right  of  the  creditor  thus 
secured  was  paramount  to  that  of  another  creditor 
of  the  same  debtor  who  attached  after  the  death  of 
the  father  the  property  inherited  by  him.  Tke  court 
rested  its  judgment  entirely  upon  the  validity  of  the 
assignment  made  by  the  debtor  of  his  expectant  rights 
as  an  heir.  * 

52.  As  to  the  rights  of  inheritance  already  accrued 
by  the  death  of  the  ancestor  or  testator,  it  was  decided 
in  France  by  the  Court  of  Cassation  that  they  could 
legally  be  pledged,  provided  the  estate  was  composed 
exclusively  of  movable  or  personal  property,  inasmuch 
as  only  such  property  can  be  pledged ;  and  provided 
further,  that  the  rights  of  the  heir  were  evidenced  by 

*  Stover  vs.  Eycleshiiner,  46  Barb.  84. 


54  The  Law  of  Pledge. 

a  title  susceptible  of  delivery,  inasmuch  as  incorporeal 
things  to  which  no  title  is  attached,  and  which,  there- 
fore, can  not  be  delivered,  can  not  be  the  subject  of  a 
pledge.  In  the  case  in  question  the  rights  of  inheritance 
of  the  heir  were  his  undivided  share  in  the  estate.  * 

53.  Pothier,  after  saying  that  it  is  only  movable 
property  which  ordinarily  is  the  object  of  the  contract 
of  pledge,  adds  :  "However,  inheritances  may  also 
be  the  object  of  this  contract.  It  is  what  takes 
place  when  the  creditor  is  put  in  possession  of  an 
estate,  in  order  that  he  should  receive  the  fruits  in 
pa^-ment  of  his  claim.  And  he  cites  both  the  Digest 
and  the  Code  of  the  Roman  law,  where  the  same  pro- 
visions are  to  be  found. f  We  should  note  that  this  is 
the  case  of  an  Afitichresis,  which  is  the  pledge  of  real 
estate  or  immovable  property,  a  mode  of  securit}'  bor- 
rowed by  the  Romans  from  the  Greeks,  and  which 
exists  also  in  modern  Civil  law,  though  not  frequently 
resorted  to  at  the  present  day.  The  principal  reason 
of  the  unpopularity  of  the  antichresis  is,  that  the  cred- 
itor in  possession  of  real  estate  for  the  sole  purpose  of 
recovering  his  debt  from  the  fruits,  and  only  for  a  lim- 
ited time,  is  not  likely  to  take  the  same  care  of  it  and 
to  improve   it  as  the  owner  himself  would  do.  J 

54.  In  Louisiana   the   point  does   not  seem   to   be 

*  Court  of  Cassation,  Sirey,  94,  1,  273. 

Baudry-Lacantinerie,  Nantissement.  Sec.  34. 
t  Pothier,  Nantissement,  Sec.  5. 

Pothier,  Nantissement,  Sec.  20. 
X  Laurent,  Nantissement,  Sec.  445. 

Code  Napoleon,  Art.  2085. 

Civil  Code  of  Louisiana,  Art.  6. 

Troplong,  Nantissement,  Sec.  495  et  seq. 

Laurent,  Nantissement,  Sec.  527  et  seq. 


What  Things  May  Be  Pledged  55 

established  one  way  or  the  other.  In  a  case  in  which 
the  heir  of  an  estate,  for  the  purpose  of  securing  his 
creditor,  did,  by  written  agreement,  transfer,  sell  and 
assign  to  him  all  his  rights,  title  and  interest  in  the 
estate,  the  Court  held  that  the  transaction  could  not 
be  a  sale,  because  no  price  was  fixed,  and  the  price 
is  an  essential  element  of  the  sale  ;  and  that  it  could 
not  be  a  pledge,  because  delivery  could  not  be  made, 
nor  possession  given,  of  the  hereditary  rights.* 

In  a  previous  case,  in  which  succession  rights  were 
transferred  by  an  heir,  in  the  same  manner,  to  his 
creditor,  in  order  to  secH7'e  him,  the  same  Court  held 
that  the  transaction  was  a  pledge,  but  that  it  could 
produce  no  effect  qtioad  third  persons  and  other  credi- 
tors, because  it  was  not  recorded  as  required  by  law^f 

This  may  be  considered  as  implying  that  rights  of 
inheritance  can  be  pledged  if  the  act  of  pledge  is 
properly  recorded.  The  question  is,  therefore,  not 
settled  in  the  jurisprudence  of  Louisiana.  But,  as 
in  that  State,  it  is  clear  that  incorporeal  things  may 
be  the  subject  of  a  pledge,  provided  a  symbolical  or 
constructive  delivery  may  be  made,  it  is  difficult  to 
perceive  why  rights  of  inheritance  in  an  estate  com- 
posed exclusively  of  movable  property,  should  not  be 
pledged  if  the  title  to  such  rights  is  susceptible  of  de- 
livery, as  was  decided  by  the  Court  of  Cassation  in  the 
case  alluded  to  above 

55.  Under  the  principles  of  the  Common  law  the 
pledge  of  rights  of  inheritance  is  more  easily  estab- 

*  Forbes  vs.  Burke,  24  La.  An.  85. 
t  Succession  of  Argote,  3  La.  An.  477. 


56  The  Law  of  Pledge. 

lished.  In  a  recent  case  decided  by  the  court  of 
Pennsylvania,  it  was  held  that  the  assignment  by 
deed  poll,  made  by  a  son  to  his  fathers  executors, 
of  all  his  interest  in  the  estate  to  secure  his  debt  to 
the  estate,  was  a  valid  pledge,  though  it  would  not 
be  as  an  assignment,  for  want  of  registry.  The  estate 
was  composed  both  of  real  and  personal  property. 
The  court  said  that  so  far  as  the  interest  pledged  was 
personalty,  it  was  a  valid  and  effective  assignment. 
But  so  far  as  the  interest  of  the  heir  was  realty,  the 
question  was  not  decided  and  was  deferred  to  subse- 
quent proceedings  before  the  master  in  chancery  and 
the  court  below.  It  is  remarkable,  at  the  same  time, 
that  a  doubt  is  raised  in  the  opinion  of  the  court 
whether  the  interest  in  the  realty  is  separable  at  all 
from  the  blended  interest.  We  may,  then,  ask,  if  it 
is  not  separable,  whether  the  pledge  is  still  valid  upon 
a  compound  of  personalty  and  realty.  "* 

Can  a  Lease  of  Real  Estate  be  Pledged  b? 

THE  Lessee  ? 

56.  It  seems  that  this  question  should  be  answered 
in  the  affirmative. 

Under  the  Common  Law  authorities  the  validity  of 
such  a  pledge  by  assignment  of  the  rights  of  the  lease 
and  delivery  of  the  act  of  lease  to  the  pledgee  has 
often  been  recognized. f 


*  Handy 's  Estate,  Larned  Appeal,  167  Pa.  St.  552. 
t  Penney  vs.  Lynn,  59  N.  W.  1043,  Minn. 

Am.  Digest,  1895,  p.  3739. 

Am.  Digest,  1894,  p.  3750. 

Am.  Digest,  1893,  p.  4022. 


What  Things  May  Be  Pledged.  57 

But  can  it  be  done  in  the  form  of  a  contract  of 
pledge  proper — that  is,  by  dehvery  of  the  lease  to  the 
pledgee  ? 

The  Court  of  Louisiana  decided  that  it  could  not 
be  done,  and  hints  in  the  decision  that  the  onl}^ 
manner  in  which  the  lessee  can  effectually  pledge  the 
lease  is  by  making  a  transfer  of  it  to  the  pledgee  and 
notifying  the  lessor. ■^''" 

57.  The  question  has  presented  itself  before  the 
courts  in  France.  The  court  of  the  first  instance 
tliere  held  that,  placing  the  lease  in  the  hands  of  the 
pledgee,  under  the  terms  of  a  written  act  of  pledge, 
and  notifying  the  lessor,  constituted  a  valid  pledge  of 
the  lease,  though  possession  of  the  leased  premises 
was  not  given  to  the  pledgee.  The  Court  considered 
tliat  giving  possession  of  the  real  estate  to  the  pledgee 
(unless  it  was  by  the  antichresis^  which  the  lessee 
could  not  do)  would  be  no  pledge,  as  this  contract 
only  applied  to  movable  or  personal  property.  But 
the  Court  thought  that  the  right  to  occupy  the  leased 
premises  was  an  incorporeal  thing,  susceptible  of 
being  pledged,  and  delivering  possession  of  the  title 
or  evidence  of  that  right,  to-wit :  the  act  of  lease, 
was,  on  that  point,  a  sufficient  compliance  with  the 
law,  which  provides  that  possession  of  incorporeal 
things  may  be  fictitious  or  symbolical. 

The  Court  of  Appeals  reversed  the  decision  on  the 
ground  that  there  could  be  no  pledge  of  the  lease 
without  possession   of   the  leased    oremises.      But  the 

*  Coffin  vs.  Kirevan,  7  La.  An.  221. 


58  The  LA\y  of  Pledge. 

Court  of  Cassation  affirmed  the  judgment  of  the  court 
of  first  instance,  fixing  the  jurisprudence  of  France 
upon  this  question,  that  a  lease  of  real  estate  may  be 
pledged  by  the  lesree  b}'^  an  act  of  pledge  proper.'' 

58.  Pont  expresses  a  positive  opinion  on  this  sub- 
ject and  sa^'S :  '^'As  a  general  rule,  it  can  not  be 
doubted  that  a  lease  may  be  the  subject  of  a  pledge. 
Notwithstanding  the  lively  discussions  which  have 
taken  place  about  the  nature  of  the  lessee's  right,  it 
can  no  lono;er  be  contended  that  it  is  not  a  movable 
right.  At  the  same  time  that  he  is  the  debtor  of  the 
rent,  which  makes  the  lessor  the  creditor  of  it,  the 
lessee  has  clearly  a  right  of  use.  That  right  is  then, 
under  the  terms  of  Arts.  2072  and  2075,  ^  movable 
right, — of  which  the  lessee  is  the  creditor.  It  may, 
consequently,  be  the  object  of  the  contract  of  pledge  ; 
and  this  point  (if  not  the  one  which  relates  to  the 
dehver}'  necessary  to  make  the  contract  valid  as  to 
third  persons)  has  been  admitted  without  difficultv  bv 
jurisprudence."  j 

Laurent,  the  great  Civilian,  reasons  upon  this  sub- 
ject with  his  usual  clearness  and  force,  and  approves 
the  doctrine  established  by  the  Court  of  Cassation, 
that  a  lease  may  be  pledged.! 

59.  But,  qiK^re:  If  in  the  act  of  lease  it  were  ex- 
pressly stipulated,  as  is  generally  the  case  in  some 
States,  that  the  lessee  shall  not  have  the  riorht  of  either 


*  Dalloz,  1859,  I,  167. 

Sirey,  .59  I,  913. 
t  Pont,  Des  Petits  Contrats,  Vol.  2,  Sec.  1103. 
X  Laurent,  Droit  Civil,  VoL  28,  Sec.  461. 

Baudry-Lacantinerie,  Nantissement.  p.  19,  Sec.  3G1 


What  Things  May  Be  Pledged.  59 


subleasing  the  propert}'  or  transferring  the  lease, 
could  he  pledge  it?  It  would  seem  not,  for  the 
pledge,  if  foreclosed,  would  lead  to  the  sale  of  the 
lease,  or  at  least  to  the  sale  of  the  right  of  occupation 
of  the  leased  premises ;  and  the  lessee  would  have 
done  thereby  indirectly,  in  violation  of  the  terms  and 
conditions  of  the  lease,  what  he  could  not  do  directly. 

Can  the  Lessor  Pledge  the  Rent  of  the  Leased 
Property? 

60.  At  Common  law  it  has  been  held  that  the  assisfn- 
ment  of  the  lease  by  the  lessor,  as  security  for  the 
debt  due  to  the  assignee,  constitutes  a  pledge  of  the 
rents,  and  that  the  assignee  has  the  right  to  collect 
them  and  apply  them  to  his  debt.  The  pledgee, 
in  that  case,  has  a  lien  upon  the  rents,  though  the 
ownership  of  the  lease  remains  with  the  debtor  and 
pledgeor.* 

61.  This  doctrine  would  hardly  be  upheld  by  the 
Civil  law.  Rent  is  an  incorporeal  thing.  When  due, 
ic  becomes  a  claim  or  credit  belonging  to  the  lessor. 
Rights  can  be  pledged  when  they  can  be  delivered 
symbolically  to  the  pledgee ;  that  constitutes  his 
possession,  the  indispensable  condition  of  the  pledge. 
The  symbolical  delivery  is  the  delivery  of  the  title  or 
instrument  which  proves  the  existence  of  the  right 
or  credit.  "When  a  debtor  wishes  to  pawn  a  claim 
on    another  person   he    must    make  a  transfer  of  it  in 


*  Jones,  on  Fledges,  Sec.  19. 
Dewey  vs.  Bowman,  8  Cal.  145. 


60  The  Law  of  Pledge. 

the  act  of  pledge,  and  deliver  to  the  creditor  to  whom 
it  is  transferred  the  note  or  instrument  which  proves 
its  existence  if  it  be  under  private  signature,  and  must 
endorse  it  if  it  be  negotiable."* 

If  the  claim  or  credit  is  not  proved  by  a  title^  or 
such  instrument,  it  follows  that  it  can  not  be  pledged. 
Thus  Laurent  sa3's  :  "It  results  from  Art.  2076  that 
the  pledge  of  a  claim  is  impossible  when  it  is  not 
established  by  a  title '^  in  that  case  it  is  impossible  to 
put  the  creditor  in  possession,  and  without  that  con- 
dition there  is  no  pledge."  j 

62.  The  lessor  has  no ////e  or  instrument  proving 
the  existence  of  his  credit  or  claim  for  the  rent.  Even 
in  case  of  a  written  lease,  that  document  does  not 
establish  that  the  rent  is  not  paid,  and  that  therefore 
the  lessor  has  a  claim   for  it  against  the  lessee. 

It  is  only  where,  as  is  customary  in  some  States, 
the  lessee  gives  his  promissory  notes  in  representa- 
tion of  the  rent,  that  the  lessor  could  pledge  them 
and  thereby  pledge  the  rent,  whether  due  or  not. 

Can  a  Patent  of  Invention  be  Pledged  .f* 

(S^.  This  question  has  been  decided  affirmatively  by 
the  courts  of  France.  The  difficulty  in  such  cases  was 
that  the  patent  is  an  incorporeal  right,  and  for  the 
pledge  of  such  rights  or  credits,  notice  of  the  transfer 
must  be  given  to  the  debtor  to  make  the  pledge  valid. 


*  Civil  Code  of  Louisiana,  Art.  3156. 

Laurent,  Droit  Civil,  Vol,  28,  Sec.  478. 
t  Laurent,  Droit  Civil,  Vol.  28,  Sec,  477, 

Troplong,  Nantissement,  Sec,  278, 


What  Things  May  Be  Pledged.  61 

There  is  no  debtor  of  the  patent.  Hence  no  notice 
is  possible.  The  French  courts  held  that  in  default  of 
a  provision  of  the  law  on  that  point,  the  pledge  was 
valid  without  notice.* 

But  the  pledgee  has  no  right  in  that  case  to  work 
the  patented  invention  and  sell  the  articles  manufact- 
ured under  it.  This  right  remains  with  the  inventor. 
The  pledgee  would  be  infringing  upon  the  patent  if 
he  did.f 

Can    Works  of   the    Mind,  Either  Artistic  or 
Literary,  be  Pledged? 

64.  This  has  also  been  decided  affirmatively  b}'  the 
Courts  of  the  Civil  law,  provided  the  work  of  the 
mind,  artistic  or  literary,  has  been  materialized  by 
writing,  printing,  engraving  and  such  other  ways, 
and  that  the  manuscript,  or  printed  or  engraved  article 
has  been  put  in  the  possession  of  the  pledgee.  It  has 
been  held,  in  such  cases,  that  the  right  of  the  repro- 
duction of  the  work  does  not  belong  to  the  pledgeor 
but  to  the  pledgee.  The  profits  accruing  to  the  latter 
would  go  to  the  extinguishment  or  reduction  of  the 
debt.t 


*  Laurent,  Du  Gage,  Vol.  28,  Sees.  462-465,  p.  455. 

Aubry  et  Kan,  Vol.  4,  p.  2U5. 

Baudry-Lacantinerie,  Xantissement,  Vol.  1,  p.  19. 

Dalioz,  1865,  2,231. 
t  Pont,  Des  Petits  Contrats,  Vol.  2,  Sec.  1103. 
j  Baudry-Lacantinerie,  Xantissement,  Vol.  1,  p.  19. 

Laurent,  Vol,  28,  Sec.  444. 

Dalioz,  1875,  2,  43. 


CHAPTER  V. 

65.  A  pledge  may  be  given  to  secure  the  fulfilment 
of  any  legal  obligation,  ^r6>  ciiaciimque  obligatione,  as 
well  as  the  payment  of  a  moneyed  debt.  Thus,  the 
obligation  of  a  lessee  to  keep  the  leased  premises  in 
good  order,  as  well  as  to  pay  the  rent,  may  be  secured 
or  guaranteed  by  a  pledge  given  to  the  lessor.  The 
obligation  of  the  vendor  to  deliv^er  the  thing  sold  may 
be  secured  or  guaranteed  by  a  pledge,  as  well  as  the 
obligation  of  the  purchaser  to  pay  the  price  of  sale. 
A  suret}^  or  a  warrantor  may  be  secured  by  a  pledge 
against  the  consequences  of  his  eventual  liability.  In  a 
word,  pledges  may  be  given  for  simple  or  conditional 
obligations  and  for  all  lawful  transactions  which  may  be 
the  subject  of  trade  or  business.  If  the  principal  con- 
tract is  unlawful  or  void,  the  pledge  given  to  secure 
it  is  clearly  null.  But  if  the  principal  obligation  is 
valid,  whatever  may  be  its  origin,  its  subject  and  its 
purpose,  the  fulfilment  of  it  may  be  secured  by  pledge. 
The  principle  is  the  same  whether  the  source  of  the 
obligation  is  a  contract,  a  judgment,  a  statute,  or  a 
tort.^ 

66.  The  definitions  of  pledge  by  Sir  William  Jones 
and  Lord  Holt  are,  therefore,  defective.  The  former 
said  that  it  is :  "A  bailment  of  goods  by  a  debtor  to 
his  creditor  to  be  kept  till  the  debt  is  discharged."    And 


*  Troplon^,  Xantissenient,  Sec.  24. 
Baudry-Lacantinerie,  Nantisseinent,  Sec.  10. 

63 


C4  The  Law  of  Pledge. 

Lord  Holt  says  that  the  pledge  takes  place :  "  When 
goods  and  chattels  are  delivered  to  another  as  a  pawn 
to  be  securit}-  for  money  borrowed  of  him  by  the 
bailor."  Judge  Story,  by  the  light  of  Civil  law,  could 
not  fail  to  see  the  deficiency  of  these  definitions,  and 
said:  ''The  foregoing  definitions  are  sufficiently 
descriptive  of  the  nature  of  a  pawn  or  pledge  ;  but  they 
are  in  terms  limited  to  cases  where  a  thing  is  given  as  a 
mere  security  for  a  debt',  but  a  pawn  may  well  be  made 
as  security  for  any  other  engagement.  The  definition 
of  Domat  is,  therefore,  more  accurate,  because  it  is 
more  comprehensive,  viz. :  that  it  is  an  appropriation 
of  the  thing  given  for  the  security  of  an  engagement. 
And  in  the  Common  law  it  may  be  defined  to  be  a 
bailment  of  personal  property  as  security  for  some 
debt  or  engageinent."* 

67.  And  again,  he  asserts  the  principle  in  positive 
terms  :  "'It  matters  not  what  is  the  nature  of  the  debt 
or  engagement.  The  contract  of  pledge  is  not  con- 
fined to  an  engagement  for  the  payment  of  money ; 
but  it  is  susceptible  of  being  applied  to  any  other 
lawful  contract  whatever. "f  It  is  curious  enough 
that  in  this,  as  in  so  many  other  instances,  the  great 
expounder  of  the  Common  law  of  England  and  of  the 
United  States,  onl)-  supports  his  position  by  the  au- 
thority of  Domat  and  Pothier,  the  pillars  of  the  Civil 
law  in  France  during  the  seventeenth  and  eighteenth 
centuries. 


*  Story,  on  Bailments.  Sec.  286. 
t  Story,  Bailments,  Sec.  300. 


What  Things  May  Be  Pledged.  65 

68.  Judge  Stor}''s  remarks  condemnatory  of  the 
definition  of  the  pledge  were  made  to  apply  also  to 
that  of  Pothier,  which,  he  says,  is  in  the  following 
words :  A  contract  by  which  a  debtor  gives  to  his 
creditor  a  thing  to  detain  as  security  for  his  debt. 
Judge  Story  is  mistaken  in  limiting  the  signification 
of  the  word  debt.^  so  far  as  the  Civilians  are  concerned, 
to  a  moneyed  debt.  In  the  Civil  law  the  word  has  a 
larger  meaning.  It  signifies  the  obligation  resulting 
from  a  contract,  whether  it  is  to  pay  mone}-,  or  to  do 
something,  or  not  to  do  something.  The  party  to 
whom  the  obligation  is  due  is  the  creditor ;  the  party 
who  is  to  perform  the  obligation  or  promise,  is  the 
debtor,  whether  money  is  to  be  paid  or  something 
else  to  be  done.  Payment  by  the  debtor  means  the 
fulfilment  or  performance  of  the  obligation,  and  not 
merely  the  pa3'ment  of  money.  In  the  language  of  the 
Civilians,  we  pay  a  things  as  well  as  a  sum  of  money. 

69.  In  the  same  definition  of  the  pledge,  when 
Pothier  says  that  the  debtor  gives  to  the  creditor  some- 
thing to  detain  as  security  for  the  debt,  he  does  not 
mean  that  a  gift  is  made  of  the  thing.  If  the  owner- 
ship of  the  thing  was  conveyed  to  the  creditor  it  would 
be  a  pledge  no  longer.  To  give,  in  the  Civil  law, 
when  used  on  the  subject  of  obligations,  means  to 
deliver."^* 

The  Civil  Code  of  Louisiana,  borrowing  its  doctrinal 
part  from  Pothier,  states  :  "By  payment  is  meant,  not 
only  the  delivery  of  a  sum  of  money,  when  such  is 
the  obligation  of  the  contract,  but  the  performance  of 

*  Pothier,  on  Obligations,  Vol.  2,  Sec.  494  et  seq. 


C6  The  Law  of  Pledge. 

that  which  the  parties  respectively  undertook,  whether 
it  be  to  give  or  to  do. 

"  He  who  is  bound  to  do,  or  not  to  do,  or  to  give, 
is  indifferently  called  the  obligor  or  the  debtor ;  and 
he  to  whom  the  obligation  is  made,  is,  in  like  man- 
ner, without  distinction  called  the  obligee  or  the 
creditor."* 

70.  The  Code  of  Louisiana  also  states  the  meaning 
of  the  words  to  give,  in  the  Civil  law,  on  the  subject 
of  Obligations.  "The  term  to  give,  in  this  division  of 
obligations,  is  applied  only  to  corporeal  objects,  that 
may  be  actually  delivered  from  one  to  another ;  and 
it  includes  the  payment  of  money  as  well  as  the 
delivery  of  any  other  article.  A  covenant  respecting  an 
incorporeal  right  comes  under  the  definition  of  con- 
tracts to  do  or  not  to  do,  because  some  act,  besides  that 
of  delivery,  is  necessary  for  the  transfer  of  such 
rights."  f  V 

With  this  understanding  of  the  Civil  law  terms,  the 
definition  of  the  contract  of  pledge  in  the  Code  of 
Louisiana  and  in  the  Code  Napoleon  is  correct.  The 
former  says :  "The  pledge  is  a  contract  by  which  one 
debtor  gives  something  to  his  creditor  as  a  security 
for  his  debt."  And  the  French  Code  defines  the 
same  contract  in  these  words :  "The  pledge  is  a  con- 
tract by  which  a  debtor  delivers  a  thing  to  his  credi- 
tor for  security  of  the  debt. "J 


*  Civil  Code  of  Louisiana,  Arts.  2131,  2132. 
t  Civil  Code  of  Louisiana,  Art.  190.5. 
X  Civil  Code  of  Louisiana.  Art.  3133. 
Code  XapoleoD,  Art.  2071. 


What  Things  May  Be  Pledged.  67 

7 1 .  As  we  have  seen  before,  the  pledge  is  itself  a 
contract,  but  it  is  not  limited  to  contractual  obligations, 
and  ma}'  secure  obligations  arising  from  other  sources, 
and  even  those  arising  from  torts.  The  Code  of 
Louisiana  enunciates  the  principle  in  these  terms : 
"  Every  lawful  obligation  may  be  enforced  by  the 
auxiliary  obligation  of  pledge."* 

But  it  is  important  to  obser\'e  that,  when  a  pledge 
is  given  to  secure  the  fulfilment  of  another  obligation 
than  a  moneyed  debt;  in  other  words,  when  the 
obligation  secured  consists  in  doing  something  ;  the 
amount  for  which  the  pledge  is  given  must  be  fixed 
in  the  contract  of  pledge.  This  is  as  necessar}'  as  in 
the  case  of  a  mortg-aore.  Parties  who  deal  with 
pledgeors  or  mortgageors  must  know  to  what  extent 
their  property  is  already  encumbered.  Thus,  if  a 
pledge  is  given  to  secure  the  faithful  administration  of 
a  corporation  officer,  a  sum  must  be  fixed  to  the  ex- 
tent of  which,  and  no  more,  the  pledge  will  answer. f 

72.  A  pledge  ma^^  be  validly  given  to  secure  the 
debt  or  obligation  of  another  person  than  the 
pledgeor.  It  is  then  a  mere  matter  of  agreement 
and  assent  of  the  parties,  resting  upon  the  general 
principles  of  the  law  of  contract.  The  rule  existed 
in  the  Roman  law;  the  principle  has  been  adopted 
by  the  Common  law  and  it  is  incorporated  in  the 
modern  Civil  law.  The  Code  Napoleon  provides : 
"The  pledge   may  be  given  by  a  third  person  for  the 


*  Civil  Code  of  Louisiana,  Art.  3136. 
t  Laurent,  Du  Gage,  Sec.  454. 


63  The  Law  of  Pledge. 

debtor."  *  The  Civil  Code  of  Louisiana  contains  the 
same  provision:  "A  person  may  give  a  pledge,  not 
only  for  his  own  debt,  but  for  that  of  another 
also."  t 

Judge  Story  states  that  the  rule  is  part  of  the  Com- 
mon law,  and  expresses  it  in  these  terms:  "It  is  of 
the  essence  of  the  contract  that  the  thing  should  be 
delivered  as  a  security  for  some  debt  or  engagement. 
But  it  is  of  no  consequence  whether  the  debt  or  en- 
gagement for  which  the  security  is  given  is  that  of 
the  pledgeor  or  of  any  other  person  ;  for  if  there  is 
an  assent  by  all  the  parties,  it  is  equally  obligator}-  in 
each  case."  J 

It  is  in  the  same  manner  that  a  person  may  giv^e  a 
mortgage  on  his  property  to  secure  the  debt  of  another 
person.  § 

73.  In  case  of  a  person  pledging  his  property  for 
the  debt  of  another,  there  intervenes,  says  Pothier,  a 
double  juridical  operation,  a  contract  of  pledge  be- 
tween the  third  person  and  the  creditor,  with  all  its 
proper  effects,  as  if  the  pledge  had  been  given  by  the 
debtor ;  and  between  the  third  person  and  the  debtor, 
a  contract  of  mandate,  or  a  ^?/f«5z -con tract  of  negotio- 
ru7n  gestor^  by  virtue  of  which  the  third  person  has  a 
right  of  action  against  the  debtor  if  the  pledge  has 
served  to  pay  the  debt.  || 


*  Code  Napoleon,  Art.  2077. 

t  Civil  Code  of  Louisiana,  Art.  3141. 

i  Story,  on  Bailments,  Sec.  300. 

§  Civil  Code  of  Louisiana,  Art.  3295. 

Pont,  Du  Nantissenient,  Vol.  9,  Sec.  1141. 
!i  Potbier.  Nantissenient,  No    lU. 


What  Things  May  Be  Pledged.  69 

74.  There  is  some  analogy  between  the  position  of 
the  pledgeor  in  such  case  and  that  of  the  surety,  with 
this  difference,  that  the  surety  has  bound  himself  per- 
sonally for  the  debt  of  another,  and  that  the  pledgeor 
has  bound  his  property  but  not  himself.  The  differ- 
ence is  tersely  expressed  in  the  Latin  maxim :  Res 
lion  persona  debet.  The  pledgeor  in  that  case  can 
not  plead  the  benefit  of  discussion,  or  his  discharge, 
on  account  of  indulgence  granted  to  the  debtor  by  the 
creditor,  as  the  surety  has  the  right  to  under  the  law 
of  suretyship.  * 

75.  But  the  analogy  between  the  contract  of  sure- 
tyship and  the  contract  of  pledge,  when  the  pledge  is 
given  to  secure  the  debt  of  another  person  than  the 
pledgeor,  lies  also  in  this,  that  the  surety  is  and  re- 
mains bound  even  when  the  principal  debtor  is  dis- 
charged for  some  reason  of  personal  incapacity,  such 
as  minority  or  coverture  ;  and  that  the  pledge  is  and 
remains  valid  when  the  debt  which  it  secures  is  an- 
nulled for  the  same  reasons  of  minority  or  coverture. 
Both  contracts  are  accessory  contracts,  and,  as  a  rule, 
follow  the  fate  of  the  principal  contract,  and  if  the 
latter  falls  they  fall  with  it.  If  the  obligation 
which  they  are  both  intended  to  secure  is  null  for 
some  cause  or  other,  they,  the  accessory  con- 
tracts, are  null  also,  as  they  can  not  support  what 
is  set  aside.      But  when    the   principal   obligation   is 


Ti'oplong,  Xantissement,  Sees.  375,  376. 

Pont,  Nantiasement,  Sec.  1141. 

Baudry-Laoantinerie,  Kantissement,  Sec.  12. 

Laurent,  Du  Gage,  Sec.  443. 

James  vs.  Pike,  Lapeyre  &  Brother,  23  La.  An.  477. 


70  The  Law  of  Pledge. 

only  relatively  void,  or  voidable,  owing  to  an  ex- 
ception personal  to  the  debtor,  the  suret}'  can  not  plead 
that  exception  and  he  remains  liable.  So  the  pledgeor 
can  not  take  advantage  ot  the  incapacity  personal  to 
the  debtor  for  w^hom  he  has  given  the  pledge,  and  the 
latter  remains  valid.* 

76.  The  contract  of  pledge  being  an  accessor}- one, 
intended  only  to  secure  a  principal  obligation,  like 
the  contract  of  mortgage  and  the  contract  of  suret}'- 
ship,  it  is  evident  that  when  the  principal  obligation 
is  null  the  pledge  is  necessarily  null  also,  and  lapses. 
Accessor  him  sequitiir  priiicipale.  It  can  not  subsist 
when  there  is  no  debt  for  it  to  secure. f 

The  Civil  Code  of  Louisiana  has  enacted  the  prin- 
ciple in  two  articles  : 

''  If  the  principal  obligation  be  conditional,  that  of 
the  pledge  is  confirmed  or  extinguished  with  it." 

"  If  the  obligation  is  null,  so  also  is  the  pledge."^ 

Whether  the  conditional  obligation  falls  by  virtue 
of  the  condition,  or  whether  the  obligation  is  null 
from  its  own  nature,  it  is  evident  that  the  pledgeor  is 
entitled  to  the  restitution  of  the  pledge,  and   that  the 


*  Troplong,  Da  Cautionnement,  Sees.  73,  75.  76,  82. 

Pont,  Du  Cautionneinent.  Sees.  45,  4G. 

Civil  Code  of  Louisiana,  Art.  303G. 

Code  Napoleon,  Art.  2012. 

Brandt,  Suretyship. See.  121. 

Kennedy  vs.  Bo*si(M-o,  16  La.  An.  44S. 

Levy  vs.  Wise,  15  La.  An,  38. 

Burge,  on  Suretyship,  pp.  6  and  7. 
t  Baudry-Laeantinerie,  Nantissement,  Sec.  9. 
X  Civil  Code  of  Louisiana,  Arts.  3137,  3138. 


What  Things  May  Be  Pledged.  71 

pledgee  has  no  right  to   retain  it  the  moment  there  is 
an  end  to  the  principal  obligation.* 

77,  We  must  note,  however,  an  important  point  on 
this  subject.  If  the  pledge  has  been  given  to  secure 
an  illegal  or  immoral  obligation,  the  pledgeor  has  no 
right  of  action  in  court  to  recover  it.  It  is  not,  in 
that  case,  that  the  pledgee  has  the  right  to  retain  the 
thing  pledged.  It  is  not  that,  the  principal  obligation 
being  null,  the  pledge  is  valid.  It  is  simply  that  the 
law  will  not  lend  its  aid  to  a  party  who  has  violated  its 
commands,  to  recover  his  property  even  from  the 
hands  of  a  wrongdoer,  or  of  one  who  detains  it  with- 
out right  or  authority.  In  all  such  cases  the  courts 
dismiss  both  parties  and  leave  them  where  their  own 
conduct  has  led  them.  The  rule  is  inflexible  that  litigants 
must  come  into  court  with  clean  hands.  The  conse- 
quence is  that  the  party  in  possession  of  the  property 
transferred  for  an  illegal  purpose  shall  not  be  dis- 
turbed by  legal  proceedings,  f 

78.  This  principle  is  part  also  of  the  Common  law, 
which,   like   the  modern   Civil  law,  has  taken  it  from 


*  Story,  on  Bailments,  Sec.  361. 

Troplong,  N^antissenient,  Sec.  419. 

Pothier,  Pandects,  Book  20,  Tit.  6,  Sec.  1,  L.  8. 
t  Civil  Code  of  Louisiana,  Art.  1893. 

Code  Napoleon,  Art.  1133. 

Pothier,  Des  Obligations,  Sec.  45. 

Larombiere,  Des  Obligations,  Vol.  1,  Sec.  10. 

Gravier  vs.  Carroby,  17  La.  118. 

Davis  vs.  Holbrook,  1  La.  An.  178. 

Windham  vs.  Cerf,  19  La.  An.  498. 

Boyd  vs.  Chaffe,  21  La.  An.  476. 

Tanneret  vs.  Marshall,  21  La.  An.  619. 

Leveret  vs.  Creditors,  22  La.  An.  105. 

Dean  vs.  Martin,  24  La.  An.  103. 

Antoine  vs.  Smith,  40  La.  An.  560. 


72  The   Law  of  Pledge. 

the  Roman  law.  "The  Common  law  maxim  is,  says 
Chitty,  ex  turpi  contractu  oritzcr  non  action  The 
reason  of  the  rule  is  the  same  in  both  S3-stems. 
It  is  not  to  protect  the  party  who  has  entered  into 
an  unlawful  agreement  and  refuses  to  execute  it, 
that  the  law  will  not  compel  him  to  fulfil  his 
promise  or  to  return  what  he  has  unlawfully  re- 
ceived ;  it  is  to  benefit  the  public  and  improve  the 
public  morals.* 

And,  in  case  of  property  deposited  under  an  unlaw- 
ful contract  in  the  hands  of  a  party  who  refuses  to 
return  it,  both  the  Civil  and  the  Common  law  rest  their 
principle  upon  the  Roman  maxim  in  -pari  delicto 
potior  est  conditio  defendentis  et  possidentis. 

79.  This  maxim  was  applied  and  commented 
upon  by  a  Justice  of  the  Court  of  Queen's  Bench  in 
the  following  words:  "  The  maxim  that  '  in  pari 
delicto  potior  est  conditio  possidentis.,  is  as  thoroughly 
settled  as  an^^  proposition  of  law  can  be.  It  is  a  maxim 
of  law  established,  not  for  the  benefit  of  plaintiffs  or 
defendants,  but  is  founded  on  the  principles  of  public 
polic}',  which  will  not  assist  a  plaintiff  who  has  paid 
over  money  or  handed  over  property  in  pursuance  of 
an  illegal  or  immoral  contract,  to  recover  it  back,  'for 
the  courts  will  not  assist  an  illegal  transaction  in 
any  respect:'  per  Lord  Ellenborough  in  Edgar  vs. 
Fowler,   3  East  222  ;    Collins  vs.   Blantern,   2  Wils. 


*  Chitty,  on  Contracts,  4th  Am.  Edit.,  p.  513. 
Parsons,  on  Contracts,  Vol.  1,  Sec.  45G  et  seq. 
Wharton,  on  Contracts,  Vol.  2.  Sec.  335  et  seq. 


What  Things  May  Be  Pledged.  73 

341  ;   Lord  Mansfield  in  Holman  vs.  Johnson,  Cowp. 

343."* 

In  that  case  the  contention  was  between  the   pkiin- 

tiff,  who  had  pledged  a  bank  note  as  security  for  the 
payment  of  wine  and  victuals,  and  the  defendant,  who 
had  furnished  them  for  the  use  of  a  house  of  prostitu- 
tion. The  plaintiff  sued  for  the  restitution  of  the 
pledge.  It  does  not  appear  in  the  report  of  the  case 
whether  the  debt  was  paid  or  not,  when  the  pledgee 
demanded  the  return  of  the  pledge ;  and  that  fact  does 
not  seem  to  have  been  of  any  consideration  in  the  con- 
troversy. The  plaintiff  tried  by  every  possible  tech- 
nicality of  pleading  to  avoid  the  issue  of  immorality 
in  the  transaction,  but  he  failed  in  that;  and  the 
Court  held  that  he  could  not  recover  the  pledge  because 
it  was  given  for  an  unlawful  purpose. 

80.  It  is  worth  noticing  that  one  of  the  justices  re- 
marked on  the  trial :  "If  a  person  lets  a  house  for  an 
immoral  purpose,  are  his  enforceable  rights  gone,  so 
that  he  can  not  bring  ejectment?" 

This  reflection  is  suggestive  of  serious  difficulties, 
or  rather,  of  the  very  grave  consequences  of  the 
principle  that,  in  -pari  delicto -potior  est  conditio  possi- 
dentis^ and  that  the  courts  will  not  aid  a  guilty  party 
to  recover  his  property,  although  the  wrongful  detainer 
has  no  right  or  authority'  to  keep  it.   A  house  is  rented 


'  Taylor  vs.  Chester,  L.  R,  4  Q.  B.  309. 
King  vs.  Green,  G  Allen,  139. 
Hall  vs.  Corcoran,  107  Mass.  251. 
Morton  vs.  Gloster,  46  Me.  520. 
Stewart  vs.  Davis,  31  Ark.  51 S. 
Fisher  vs.  Kyle,  27  Mich.  454. 


74  The  Law  of  Pledge. 

for  a  gambling  establishment  or  to  a  prostitute,  in  a 
State  where  the  law  forbids  gambling  or  prostitution. 
The  lessoi  is  aware  of  the  character  and  of  the  pur- 
pose of  the  lessee.  At  the  termination  of  the  lease 
the  lessee  refuses  to  surrender  the  premises.  The 
jessor  brings  an  ejectment  suit.  Will  the  courts 
■fiend  him  their  aid  to  obtain  possession  of  his 
property?  We  are  only  repeating  the  qucere  of  the 
English  judge.  But  is  it  possible  to  answer  it  in  the 
negative?  Has  not  the  latter  handed  over  his  -prop- 
erty in  pursuance  of  an  illegal  or  immoral  contract^ 
in  the  words  of  the  decision  of  the  Court  of  Queen's 
Bench?  Leasing  a  house  for  gambling  or  prostitu- 
tion, where  the  same  are  prohibited,  constitutes  an 
illegal  and  immoral  contract,  so  much  so  that  the 
rent  can  not  be  recovered  in  court.  * 

Can  there  be  any  difference  in  law  whether  the 
property  thus  handed  over  be  a  bank  note  or  a  house, 
or  any  other  species  of  property?  But  will  the  wrong- 
ful detainer  keep  it  forever?  As  he  has  no  right  or 
title  whatever,  and  the  lessor  is  still  the  owner,  can 
not  the  latter  take  it  back  by  force,  or  by  strata- 
gem? His  creditors  could,  clearly,  treat  the  property 
still  as  his,  and  reach  it  by  attachment. 

8i.  But  we  must  obsen^e,  on  the  other  side,  that  the 
authorities»are  not  harmonious  as  to  the  degree  of  com- 
pUcity  of  the  lessor  with  the  lessee,  in  the  lease  of  a 
house  for  an  illegal  purpose,  which  will  contaminate  the 
lease  itself  and  deprive  the  lessor  of  the  aid  of  the  courts 

*  Wharton,  on  Contracts.  Sees.  348,  374. 


What  Things  May  Be  Pledged.  75 

to  enforce  his  rights.  In  some  cases  it  was  decided  that 
the  mere  knowledge  of  the  lessor  that  the  lessee  rents 
the  house  for  the  unlawful  purpose  does  not  render 
him  a  participant  in  the  illegal  and  immoral  under- 
taking, and  does  not,  therefore,  invalidate  the  contract. 

"  To  annul  a  contract,"  says  Mr.  Wharton,  *' which 
promotes  an  illegal  object,  not  only  there  must  be  a 
knowledge  that  the  object  is  illegal,  but  there  must  be 
complicity  in  the  performance  of  an  illegal  act.  *  *  * 
There  must  be  a  union  of  purposes  between  the  party 
supplying  and  the  party  supplied  in  order  to  infect 
the  former  with  the  latter's  criminality."* 

The  purpose  of  the  lessee,  in  the  lease  in  question, 
is  to  keep  a  gambling  establishment  or  the  house  of 
prostitution  ;  but  the  purpose  of  the  lessor  is  not  the 
same ;  his  purpose  is  to  lease  his  propert}^,  and  that 
purpose  may  not  be,  and  needs  not  be,  and  is  not 
ordinarily,  that  the  house  should  serve  for  the  pro- 
hibited object.  There  is  not,  therefore,  presumably, 
a  complicity  on  the  part  of  the  lessor  in  the  perform- 
ance of  the  lessee's  illegal  act. 

82.  Finally,  it  is  in  this  respect  of  the  contract  of 
pledge  as  it  is  of  all  contracts.  If  the  agreement  is 
based  upon  an  unlawful  consideration,  but  the  con- 
tract is  yet  unexecuted  or  its  purposes  or  object  has 
not  yet  been  carried  out,  the  pledgeor  may  repudiate 
his  engagement  and  demand  the  restitution  of  the 
thing  pledged,  and  the  Courts  in  that  case  will  lend 
him  their  aid  to  recover  his  property.     The  reason  is 


*  Wharton,  on  Contracts,  Sees.  343,  348,  374. 


76  The  Law  of  Pledge. 

that  in  such  cases  the  plaintiff's  claim  is  not  to  enforce, 
but  on  the  contrary  to  repudiate  an  illegal  contract. 
The  object  of  the  suit  is  not  to  get  paid  for  something 
illegally  done  or  to  get  back  property  handed  over  for 
an  unlawful  purpose  after  the  purpose  has  been  ful- 
filled, but  to  prevent  the  defendant  from  using  an  ille- 
o-al  pretext  to  retain  money  or  propert}^'  unlawfully 
detained.* 

83.  This  doctrine  is  lirmly  established.  The  Su- 
preme Court  of  the  United  States  expounded  it  at 
length  in  the  case  of  Spring  Company  vs.  Knowlton, 
103  U.  S.  49,  and  quoted  the  following  paragraph  of 
the  Decision  in  Taylor  vs.  Bowers,  i  Q.  B.  D.  291, 
in  which  Lord  Justice  Mellish  said:  "If  the  illegal 
transaction  had  been  carried  out,  the  plaintiff  himself, 
in  my  judgment,  could  not  afterward  have  recovered 
the  goods.  But  the  illegal  transaction  was  not  carried 
out;  it  came  wholly  to  an  end.  To  hold  that  the 
plaintiff  is  entitled  to  recover  does  not  carry  out  the 
illegal  transaction,  but  the  effect  is  to  put  everybody 
in  the  same  situation  as  they  were  before  the  illegal 
transaction  was  determined  upon,  and  before  the  par- 
ties took  any  step  to  carry  it  out.  That,  I  apprehend, 
is  the  true  distinction  in  point  of  law.  If  mone}'  is 
paid,  or  goods  delivered,  for  an  illegal  purpose,  the 
person  who  had  so  paid  the  money  or  delivered  the 
goods  may.  recover  them  back  before   the  illegal  pur- 


*  Wharton,  on  Contracts.  Sees.  352-354. 
Parsons,  on  Contracts,  Vol.  2,  p.  746. 
Addison,  on  Contracts,  Vol.  2,  Sec.  1412. 
Story,  on  Contracts,  Vol.  2,  Sec.  G17. 


What  Things  May  Be  Pledged.  77 

pose  is  carried  out ;  but  he  waits  till  the  illegal  pur- 
pose is  carried  out,  or  if  he  seeks  to  enforce  the  illegal 
transaction,  in  neither  can  he  maintain  an  action  ;  the 
law  will  not  allow  that  to  be  done."* 


Spring  Company  vs.  Knowlton,  103  U.  S.  59. 
Taylor  vs.  Bowers,  1  Q.  B.  D.  291. 


CHAPTER  VI. 

Forms  and  Essentials  of  the  Pledge. 

84.  The  pledge  being  a  contract  of  natural  law  is 
formed^  at  Common  law^  by  the  mere  consent  of  the 
parties  and  delivery  of  possession  of  the  thing  pledged 
to  the  pledgee.  No  written  act  is  necessary  as  evi- 
dence of  the  contract.  No  registration  is  necessary 
as  notice  to  third  persons.  Possession  by  the  pledgee 
is  notice  to  the  world.  But  there  must  be  delivery 
and  continued  possession  in  the  pledgee.  This  is  of 
the  very  essence  of  the  contract  of  pledge.  Without 
possession  there  is  no  valid  pledge.  The  reason  of  it 
is,  not  only  to  secure  the  rights  of  the  pledgee^  but 
also  to  prevent  fraud  and  imposition  by  the  pledgeor. 
If  the  thing  given  in  pledge  remained  in  the  hands  of 
the  latter,  he  could  pledge  it  to  several  persons  at  the 
same  time,  deceiving  them  all.  Besides  this,  he 
would  preserve  a  fallacious  credit  from  the  property  in 
his  possession^  ostensibly  answering  for  his  obliga- 
tions. 

In  the  emphatic  language  of  Troplong:  ""  By  dis- 
possessing himself;  the  debtor  announces  to  third 
persons  who  deal  with  him  that  he  is  empoverished 
by  that  much.  It  is  necessary  for  commerce  that  this 
should  be  shown  clearly ;  it  gives  the   measure  of  the 

debtor's  credit.     Where  would  business   be   if  things 
79 


80  The  Law  of  Pledge. 

were  pledged   without  deliveiy  !  what  frauds !  what 
deceptions  !  what  losses  for  third  persons  !  "* 

85.  The  Code  of  Louisiana  provides  in  clear  terms 
for  the  necessit}'  of  delivery  and  possession  of  the 
pledge  as  a  condition  of  the  validity  of  the  contract. 

"  It  is  essential  to  the  contract  of  pledge  that  the 
creditor  be  put  in  possession  of  the  thing  given  to  him 
in  pledge,  and  consequently  that  actual  deliver}*  of  it 
be  made  to  him,  unless  he  has  possession  of  it  already 
by  some  other  right."     Art.  3152. 

"  But  this  delivery  is  only  necessary  with  respect  to 
corporeal  things ;  as  to  incorporeal  things,  such  as 
credits,  which  are  given  in  pledge,  the  deliver}'  is 
merely  fictitious  and  symbolical."     Art.  3153. 

"In  no  case  does  this  privilege  subsist  on  the  pledge 
except  when  the  thing  pledged,  if  it  be  a  corporeal 
movable,  or  the  evidence  of  the  credit  if  it  be  a  note 
or  other  instrument  under  private  signature,  has  been 
actually  put  and  remained  in  the  possession  of  the 
creditor,  or  of  a  third  person  agreed  on  by  the 
parties."     Art.  3162. 

86.  On  the  principle  that,  for  the  validity  of  the 
pledge,  the  pledgee  must  have  possession  of  the  thing 
pledged,  and  that  the  reason  of  it  is  to  prevent  fraud 
and  deception  by  the  pledgeor,  there  is  a  perfect  ac- 
cord between  the  Civil  law  and  the  Common  law. 


Troplong.  Dn  Xantissement.  Sees.  297.  298. 

Laurent,  Droit  Civil,  Vol.  28,  Sees.  469  et  seq. 

Code  Xapoleon,  Art.  2070. 

Civil  Code  of  Louisiana.  Art.  3152. 

Casey  vs.  Cavaroc.  90  U.  S.  467. 


Forms  and  Essentials  op  the  Pledge.  81 

jNIr.  Jones  says  in  words  of  the  same  purport  as  the 
articles  of  the  Louisiana  Code:  "To  constitute  a 
pledge  the  pledgee  must  take  possession ;  and  to  pre- 
serve it  he  must  retain  possession.  An  actual  deliv- 
ery of  property  capable  of  personal  possession  is 
essential.''  ^' 

Judge  Stor}'  says  also:  "It  is  of  the  essence  of  the 
contract  that  there  should  be  an  actual  deliver}-  of 
the  thing."  f 

The  Supreme  Court  of  the  United  States,  in  the 
leading  case  of  Casey  vs.  Cavaroc,  96  U.  S.  467, 
speaks  in  the  same  sense  :  "The  requirement  of  pos- 
session is  an  inexorable  rule  of  law,  adopted  to  pre- 
vent fraud  and  deception  ;  for,  if  the  debtor  remains 
in  possession  the  law  presumes  that  those  who  deal 
with  him  do  so  on  the  faith  of  his  being  the  unquali- 
fied owner  of  the  goods." 

87.  It  is  this  possession  of  the  pledgee  which  ordi- 
narily distinguishes  the  pledge  of  personal  property 
from  the  chattel  mortgage  of  the  Common  law,  and 
makes  it  a  mode  of  greater  security  for  the  creditor. 
The  agreement  between  the  parties,  and  the  law  under 
which  the  agreement  is  to  be  enforced,  provide  in 
both  cases  that  the  property  is  to  serve  as  security  of 
the  debt  and  the  creditor  to  be  paid  out  of  the  pro- 
ceeds, by  privilege  and  preference  over  the  other 
creditors  of  the    debtor.      But  the    mortcrag^ee  is  not 


*  Jones,  on  Pledges,  Sec.  23. 

Kent,  Comm.,  Vol.  2,  p.  581,  note  1. 
t  Story,  Bailments,  Sec.  297. 

Am.  and  Eng.  Ency.  of  Law.  Vol.  18,  p.  50,5  it  seq. 


82  The  Law  of  Pledge. 

necessarily,  or  even  ordinarily,  like  the  pledgee,  put 
in  possession  of  the  mortgaged  propert}-.  He  has^ 
therefore^  no  control  over  it,  no  superintendence  of  it, 
until;  at  least,  when  the  time  to  foreclose  his  mortgage 
has  come,  and,  in  the  meantime,,  a  dishonest  debtor 
may  carry  it  off.  It  is  true  that  his  right  of  prefer- 
ence is  declared  and  established  in  a  deed  or  act  in 
writino:,  in  which  the  les^al  title  is  transferred  to  him 
under  condition,  which  is  recorded  in  the  books  of  the 
county  and  is  notice  to  the  world.  This  right  of  the 
mortgagee^  though  only  intended  to  secure  his  claim^ 
extends  to  a  conditional  property  of  the  thing  more- 
gaged,  and^  in  case  of  the  mortgage  of  real  estate, 
which  can  not  be  removed^  the  security  may  be  suffi- 
cient ;  but,  in  the  chattel  mortgage,  it  is  evident  that 
the  creditor  has  none  of  the  safety  of  the  pledge  owing 
to  the  want  of  possession,  and  for  that  reason  it  is 
comparatively  seldom  resorted  to  in  purely  commer- 
cial transactions. 

88.  Yet,  by  statute,  in  some  cases  of  chattel  mort- 
gage, the  creditor  is  put  in  possession  of  the  thing 
mortgaged,  and,  consequently,  it  has  often  been  held 
in  doubt  whether  the  transaction  was  a  pledge  or  a 
mortgage,  though  whenever  the  possession  passes  to 
the  creditor  in  a  contract  of  securit}',  the  law  favors 
the  conclusion  that  it  is  a  pledge  and  not  a  mortgage.* 

As  the  chattel  mortsjage  and  the  pledge  are  distinct 


*  Bank  vs.  Marshall.  11  Fed.  R.  19. 
Myer's  Fed.  Decisions,  Vol.  Ill,  p.  49. 
Jones,  on  Pledges,  p.  14. 
Edwards,  on  Bailments,  p.  19G. 


Forms  and  Essentials  of  the  Pledge.  83 

and  different  contracts  governed  by  different  rules  and 
producing  different  effects,  the  fact  tliat,  in  some  cases, 
it  is  doubtful  whether  the  contracting  parties  intended 
that  their  agreement  should  be  a  mortgage  or  a  pledge, 
shows  that  the  Common  law,  in  that  respect,  is  de- 
fective and  unsatisfactory,  as  every  law  is  which 
creates  confusion. 

89.  The  advantage  of  the  Civil  law  on  this  point 
is  that,  inasmuch  as  personal  property  can  not  be 
the  subject  of  a  mortgage,  it  can  never  be  a  question 
whether  the  contract  is  a  pledge  or  a  mortgage  when 
possession  of  the  thing  is  given  to  secure  a  debt 

The  modern  Civil  Law,  more  exact  and  more  exact- 
mg,  more  guarded  and  more  solicitous  of  the  rights 
of  third  persons  in  this  respect,  does  not  allow  the 
mortgage  of  personal  propert}-,  and  demands  that  the 
contract  of  pledge  should  be  in  writing,  except  in  case 
of  the  pledge  of  commercial  paper,  stocks,  etc.  For 
the  pledge  of  these  securities  the  Civil  law  is  also  in 
accord  with  the  Common  law,  and  permits  the  pledge 
of  them  without  any  act  in  writing,  and  by  mere  de- 
livery to  the  pledgee.  There,  the  necessities  of  com- 
merce are  paramount.* 

But  for  the  pledge  of  all  other  personal  property 
there  must  be,  in  the  Civil  law,  an  act  in  writmg 
passed   between  the   parties,  in  which  the  amount  of 


*  Civil  Code  of  Louisiana,  Art  3158. 
Code  Napoleon,  Art.  2084. 
Frencti  Code  of  Commerce,  Art.  95. 
Troplong,  Xantissement,  Sec.  118  et  seq. 
Goirand,  French  Code  of  Commerce,  p.  152. 


84  The  Law  of  Pledge. 

the  debt  secured  is  stated   and  the  thing  pledged  is 
described ;  the  act  must  also  be  recorded.* 

90.  In  Louisiana  it  is  now  a  question  where  the 
act  of  pledge  must  be  recorded.  By  the  Civil  Code 
of  1825,  the  registry  should  have  been  in  the  office  of 
a  notary  public.  By  the  Revised  Civil  Code  of  1S70, 
which  is  now  the  law  in  that  State,  the  place  of  reg- 
istry' is  not  mentioned,  f 

91.  The  transactions  in  which  personal  property, 
other  than  commercial  paper,  is  pledged,  are  not  ordi- 
narily themselves  commercial,  and  there  is  no  reason, 
where  they  are  concerned,  for  the  prompt  and  simple 
mode  of  the   pledge  by  mere  delivery  to  the  pledgee. 

But  though  the  Civil  law,  as  well  as  the  Common 
law,  permits  the  pledge  of  commercial  paper  and 
stock  by  simple  delivery  to  the  pledgee,  without  the 
written  act,  in  order  to  facilitate  commercial  or  finan- 
cial transactions,  3-el  the  written  act  is  necessary  and 
generally  used,  for  the  purpose  of  stipulating  in  favor 
of  the  pledgee  the  right  to  sell  the  pledge  at  public  or 
private  sale,  with  or  without  notice  to  the  pledgeor, 
etc.,  which  right  only  exists  in  the  contract  of  pledge 
if  agreed  upon  by  the  parties. 

The  object  of  the  wise  rule  of  the  Civil  law  provid- 
ing for  a  written  act  for  the  pledge  of  all  property 
other  than    commercial,    is  entire  1}'   to  protect   third 


*  Civil  Code  of  Louisiana.  Art.  3158. 

Code  Xapoleon,  Art.  2074. 

Martin  vs.  Creditors,  15  La.  An.  165. 
t  Civil  Code  of  Louisiana  of  1825,  Art.  3125. 

Revised  Civil  Code  of  Ivouisiana,  Art.  3158. 


Forms  and  Essentials  of  the  Pledge.  85 

persons  against  fraud  and  collusion  between  pledgeor 
and  pledgee. 

The  date  of  the  written  act  shows  whether  at  the 
time  the  pledge  was  granted  the  pledgeor  could  hon- 
estly give  a  right  of  preference  to  the  pledgee.  The 
statement  of  the  sum  secured  by  the  pledge  shows 
for  what  amount  the  pledgee  was,  at  that  moment,  a 
creditor  of  the  pledgeor.  The  description  of  the 
thing  pledged  prevents  the  fraudulent  subsequent 
substitution  of  other  and  more  valuable  property  to 
that  originally  pledged. 

92,  The  rule  that  the  thing  pledged  must  be  de- 
scribed in  the  act  of  pledge  so  as  to  be  identified, 
must  be  strictly  observed.  For  instance,  ihe  books  in 
a  bookcase  were  pledged  without  stating  the  number 
of  volumes  and  the  titles  of  the  books.  There  was 
no  sufficient  description  of  the  property  pledged,  and 
the  contract  was  declared  null.  The  French  Courts 
held  that,  in  such  a  transaction,  the  parties  could 
fraudulently  substitute  some  books  of  little  value  to 
others  of  great  value,  or  vice  versa,  and  thereby  de- 
ceive and  defraud  other  creditors  of  the  pledgeor.* 

A  distinguished  Civilian,  Professor  Baudry-Lacanti- 
nerie,  in  his  recent  book  on  the  subject  of  Pledge, 
says  that  the  law  demands  the  specialization  of  the 
thing  pledged  in  order  to  prevent  fraud  by  the 
substitution  of  an  article  of   little   value  to   a  valuable 


'■  Troploag,  Nantissenient,  Sec.  192. 
Laurent,  Vol.  28.  Sec.  455. 
Dt'Blois  vs.  Keiss,  32  La.  An.  5S3. 


8G  The   Law  of  Pledc4E. 

one,  which  the  debtor  would  thereby  remove  from  his 
creditor's  reach.  He  gives  the  example  of  a  pledge 
of  oil  designated  in  the  act  of  pledge  as  seed  oil.  The 
Court  declared  the  pledge  null  for  want  of  sufficient 
description  of  the  thing  pledged  to  identify  it ;  the  seed 
might  be  hemp  oil,  colza  oil  or  poppy  oil.* 

It  is  also  necessary  for  the  validit}^  of  the  pledge 
that  the  amount  of  the  debt  secured  be  stated  in  the 
written  act.  The  reason  of  this  is  equally  to  protect 
third  persons,  and  to  prevent  collusion  and  fraud  be- 
tween pledgeor  and  pledgee.  The  rule  is  the  same  as 
in  the  contract  of  mortgage.  But,  and  also  as  in 
mortgages,  the  pledge  may  be  given  to  secure  a  debt 
or  obligation,  which  at  the  time  of  the  pledge  is  not  yet 
fixed  or  definite.  Forinstance,  a  pledge  maybe  given  to 
secure  a  credit.  The  amount  of  the  credit  must  be  de- 
termined or  fixed.  The  sums  drawn  under  the  credit  are 
secured  by  the  pledge.  If  the  sums  drawn  exceed  the 
credit,  the  excess  is  not  secured  by  the  pledge,  even  if 
the  collaterals  exceed  the  credit  and  would  be  suffi- 
cient to  cover  the  amount  drawn.  If  the  sums  drawn 
do  not  amount  to  the  credit,  the  pledge  lapses  for  the 
difference  between  the  amount  drawn  and  that  of  the 
credit. f 

As  all  the  property  of  the  debtor  is,  by  legal  intent, 
the  common  -pledge  of  his  creditors^  the  law  will  not 
permit  a  particular  pledge  which  is  certain   neither  as 


*  Baudry-Lacanlinerie,  Xantissement,  Sec.  93. 
t  Baudry-Lacantinerie,  Nantisseinent,  Sec.  52. 
Laurent,  Droit  Civil,  Vol.  28,  Sec.  454. 


Forms  and  Essentials  op  the  Pledge.  87 

to  its  date,  nor  as  to  the  claim  which  it  secures,  nor 
as  to  the  property  by  which  it  secures  it,  and  which 
may,  therefore,  be  a  fraudulent  imposition  upon  third 
persons.* 

94.  But  the  written  act  prescribed  for  the  validity 
of  a  pledge  needs  not  be  in  any  formal  or  sacramental 
terms.  It  is  only  necessary  that  it  should  state  the 
amount  of  the  debt  secured,  the  description  of  the 
property  pledged  and  the  agreement  of  the  parties  to 
pledge  it.  The  act  may  be  in  authentic  or  notarial 
form,  or  simply  by  private  writing.  It  may  be  part 
of  the  promissory  note  or  instrument  itself  which  the 
pledge  is  intended  to  secure.  In  fact,  this  form  oipledge 
note  is  now  in  daily  use  with  man}'  of  the  moneyed  or 
banking  institutions  of  this  country.  In  a  case  coming 
up  from  Louisiana,  where  the  Civil  law  requirement 
of  the  written  act  of  pledge  prevails,  the  Supreme 
Court  of  the  United  States  had  occasion  to  pass  upon 
the  validity  of  such  -pledge  notes.  The  instrument 
was  in  these  words  : 

"  New  Orleans,  October  29,  1883. 
''  $5000.00. 

'''  Forty  days  after  date  I  promise  to  pay  to  the  order 
of  A.  Ermann,  Esq.,  five  thousand  dollars,  for  value 
received,  with  interest  at  the  rate  of  eight  per  cent, 
per  annum  from  maturity  until  paid.      Payable  at  the 


Troplong.  Du  Nantissement,  Sec. 108  et  seq. 
Laurent,  Droit  Civil,  Vol.  28,  Sec.  447,  p.  438. 
Duranton,  Droit  Civil,  Vol.  18,  Sec.  510. 
Baudry-Lacantinerie,  Du  Nantissement,  Sec.  44  et  sc/. 
Pont,  Du  Nantissement,  p.  584  et  seq. 


88  The  Law  of  Pledge. 

People's  Bank  of  New  Orleans.  This  note  is  secured 
by  a  pledge  of  the  securities  mentioned  on  the  reverse 
hereof,  and  in  case  of  its  non-payment,  the  holder  is 
hereby  authorized  to  sell  the  said  securities  at  public 
or  private  sale,  without  recourse  to  legal  proceedings, 
and  to  make  any  transfers  that  may  be  required,  ap- 
plying the  proceeds  of  sale  toward  payment  of  this 
note.     Margins  to  be  kept  good. 

"  L.  Meyer." 

"  Endorsement:  Five  warehouse  receipts,  dated 
October  29,  1883,  numbered  i,  2,  3,  4  and  5,  issued 
by  Meyer,  Weill  &  Co.  to  L.  Meyer,  and  by  him 
endorsed  to  A.  Ermann,  pa;"'ee 

"  L.  Meyer." 

The  warehouse  receipts  stated  with  sufficient  pre- 
cision what  the  goods  receipted  for  were. 

The  Court  held  the  pledge  in  that  form  valid,  and 
concluded  that  the  note  disclosed  the  amount  of  the 
debt  as  well  as  the  fact  of  the  pledge — and  the  nature 
of  the  property  pledged ;  and  that  the  delivery  of  the 
warehouse  receipts  was  a  delivery  of  the  pledge."^ 

This  form  of  pledge,  or  something  analogous,  is 
common  in  many  of  the  States  in  commercial  or  finan- 
cial transactions. 

95.  But  it  is  only  in  order  to  produce  its  effects 
against  third  persons,  and  secure  to  the  pledgee  his 
right  of  privilege  and  preference,  that  the  act  of  pledge 

*  Freiburg  vs.  Dreyfiis,  135  U.  S.  478. 


Forms  and  Essentials  of  the  Pledge.  89 

in  writing  is  necessar}-,  evt^n  in  the  Civil  law.  When 
there  are  no  other  creditors  of  the  pledgeor  contend- 
ing with  the  pledgee — in  other  words,  between  the 
pledgeor  and  pledgee  themsehes,  the  act  in  writing  is 
not  indispensable,  and  the  pledge  is  valid  without  it, 
provided  the  thing  pledged  is  delivered  to  the  pledgee 
and  remains  in  his  possession. 

Laurent,  in  his  commentaries  on  the  Civil  law, 
states  this  principle  in  the  following  words  :  "Are 
these  forms  (speaking  of  the  act  of  pledge)  of 
the  essence  of  the  contract  of  pledge,  in  such  a  way 
that  it  can  not  exist  unless  they  are  fulfilled?  The 
very  text  of  Art.  2074  (Code  Napoleon)  proves  that 
the  forms  which  it  prescribes  concern  only  third  per- 
sons. After  saying  that  the  pledge  confers  upon  the 
creditor  the  right  to  be  paid  out  of  the  thing  pledged 
by -privilege  and -preference  over  other  creditors^  the 
Code  adds  :  '  This  privilege  takes  place  only  if  there 
has  been  a  written  act,'  etc.  Therefore  it  is  for  the 
purpose  of  securing  his  right  of  preference  that  the 
pledge  creditor  must  fulfil  the  formalities  prescribed 
by  Art.  2074.  These  formalities  are,  consequently, 
foreign  to  the  relations  which  the  pledge  establishes 
between  the  creditor  and  the  debtor,  independently  of 
the  privilege."* 

96.   The  same  reasoning  should  apply  to  the  Loui- 


Laurenr.  Droit  Civil,  Vol.  28,  Sees.  446,  447. 
Troplong,  Nantissement,  Sec.  114. 
rothier,  Xantissement,  No.  17. 
Merlin,  Repertoire,  Verho  Gage. 
Baudry-Lacantinerie,  Xantissement,  Vol.  1.  p.  22. 


90  The  Law  of  Pledge. 

siana  law  on  this  point,  for  Art.  3158  of  its  Civil  Code 
is  taken  almost  verbatim  from  Art.  2074  of  the  Code 
Napoleon  commented  upon  by  Laurent. 

In  fact,  the  Court  of  Louisiana  has  so  decided 
alread}'  many  -sears  ago,  and  held  that  a  contract  of 
pledge,  in  which  no  written  act  had  been  passed,  was 
valid  and  binding  between  the  pledgeor  and  the 
pledgee,  there  being  no  third  persons,  or  creditors  of 
the  pledgeor  interested  in  the  matter."^ 

97.  It  would  be  well  for  the  Common  law  States  to 
adopt  the  rule  of  the  written  act  of  pledge,  as  they 
have  adopted  so  many  other  wise  provisions  of  the 
Civil  law,  and  to  provide  by  statute  that  all  pledges, 
except  of  commercial  or  negotiable  paper,  should  be 
b}'  written  [ict,  under  penalty  of  nullity  so  far  as 
third  persons  are  concerned.  Deceptive  transactions 
and  fraudulent  preferences  would  be  rendered  more 
difficult,  and  honest  creditors  better  protected.  There 
would  then  be  also  a  more  perfect  distinction  between 
the  chattel  mortgage  and  the  pledge. 


*  Matthews,  Finley  &  Co.  vs.  Rutherford,  7  La.  An.  il2ri. 


CHAPTER   VII. 
Pledge  in  the  Form  of  Sale. 

98.  Though  by  the  Common  law  the  contract  of 
pledge  needs  not  be  in  writing  in  an)'  case,  and  though 
by  the  Civil  law  tliere  must  be  a  written  act  in  all 
except  cases  of  commercial  pledge,  it  is  of  frequent 
occurrence,  both  in  the  countries  of  the  Common  law 
and  those  of  the  Civil  law,  to  give  to  the  pledge  the 
form  of  a  sale.  The  legality  of  such  a  transaction  has 
sometimes  been  contested,  but  the  great  preponder- 
ance of  authority  is  in  favor  of  its  validity,  especially 
in  the  Common  law  States.  This  doctrine  is  based 
upon  the  principle  that  the  contracting  parties  may 
give  to  their  agreement  the  form  and  the  name  that 
they  choose,  provided  it  is  not  fraudulent,  does  not 
injure  third  persons,  and  does  not  violate  any  require- 
ment of  the  law. 

99.  Troplong  says  on  this  point:  "  If  the  parties, 
instead  of  passing  a  contract  of  pledge,  employed  the 
simulated  form  of  a  sale,  could  third  persons  contest 
the  validity  of  the  pledge.^  No  more,  in  my  opinion, 
than  they  could  attack,  on  accoimt  of  the  form,  a 
donation  disguised  under  the  form  of  a  sale.  The 
forms  of  the  donation  are,  however,  very  solemn. 
They  have  been  established  for  a  very  useful  purpose. 
Yet,  it  is  certain  that  the  forms  of  an  onerous  contract, 
such  as   a  sale,  may  effectually  replace  them.     Why, 


92  The   Law  of  Pledge. 

then,  should  not  an  ostensible  sale  replace  the  pledge? 
It  is  what  I  can  not  understand.  We  will  see  later  on, 
iiowever,  that  this  point  has  been  contested  by  sound 
writers.     " 

loo.  But  Laurent  thinks  that  such  a  transaction  is 
generally  injurious  to  third  persons  and  therefore  null 
and  void.  He  is  of  opinion  that,  on  principle,  a  pledge 
under  the  form  of  a  sale  is  invalid.  He  says,  how- 
ever, that  when  the  sale  is  made  with  all  the  formal- 
ities required  for  the  pledge,  the  pledgee  put  in  pos- 
session and  third  persons  are  not  injured,  the  transac- 
tion may  be  valid,  and  that  the  jurisprudence  of 
France  is  settled  in  that  sense. 

Yet,  in  the  two  cases  that  he  cites,  one  of  which 
was  decided  b}-  the  Court  of  Cassation,  and  in  both 
of  which  the  pledge,  disguised  in  the  form  of  a  sale, 
was  declared  valid,  it  is  curious  to  observe  that  neither 
the  sum  to  be  secured  in  one  case  was  stated  in  the 
act,  nor  delivery  to  the  pledgee  of  the  thing  pledged, 
in  the  other  case,  seemed  to  have  taken  place. 

In  both  cases  the  pledge  was  of  a  vessel.  There 
was  no  fraud  or  imposition  in  the  transactions,  and 
third  persons  were  not  injured. 

The  facts  in  each  case  evidentl}^  influenced  the  court 
and  induced  it  to  depart  from  the  strict  principles  of 
the  law  of  pledge. 

loi.  Baudry-Lacantinerie  says  that  the  pledge  of 
a  ship,  strictly  speaking,  is  legalty  impossible,  unless 

*  Troplong,  Nantissement,  Sec.  204,  p.  208. 


Pledge  in  the  Form  of  Sale.  93 

the  pledgee  is  put  in  possession,  wliich  is  seldom 
practicable,  and  for  that  reason  the  courts  have  recog- 
nized the  validity  of  the  pledge  of  the  ship  in  the 
form   of  a  sale.'^ 

102.  Aubry  et  Ran,  who  are  also  Civilians  of  high 
authorit}',  are  of  the  same  opinion  as  Laurent  and 
condemn  the  pledge  made   in  the  form  of  a  sale.f 

103.  Baudry-Lacantinerie  is  of  opinion  that  the 
pledge  under  the  form  of  a  sale  is  valid  if  all  the  con- 
ditions necessary  for  the  pledge  exist,  and  the  creditor 
is  put  in  possession.  In  such  a  case  he  thinks  that 
the  latter  is  entitled  to  his  right  of  preference  over  the 
other  creditors  of  the  debtor ;  and  he  approves  of  the 
jurisprudence  which  has  recognized  the  principle.  J 

]Mr.  Pont,  the  continuator  of  Marcade,  and  a  Justice 
of  the  Court  of  Cassation,  and  himself  a  celebrated 
law  writer  in  France,  is  also  of  the  opinion  that  the 
pledge  under  the  form  of  a  sale  is  perfectly  valid.  § 

104.  The  jurisprudence  of  Louisiana  seems  to  be 
settled  upon  this  point,  to  the  effect  that  the  contract 
of  pledge  is  valid  in  the  form  of  a  sale,  when  it  con- 
tains all  the  requirements  of  the  pledge,  is  not  fraudu- 
lent or  injurious  to  third  persons,  and  possession  of  the 
thing  pledged  is  delivered  to  the  pledgee  or  ostensible 
vendee.. 


*  Baudry-Lacantinerie,  Nantissement.  Vol.  1,  p.  50. 
t  Laurent,  Droit  Civil,  Vol.  28,  Sec.  4S8. 

Aubrv  et  Ilau,  Vol.  4,  p.  7U3  Sec.  432,  n.  13. 

Dalloz,  187(3,  I,  347. 

Same,  1852,  2,  8. 
J  Baudry-Lacantinerie,  Nantissenient,  Sec.  88, 

Duranton,  Droit  Civil,  Vol.  23.  Sec.  538. 

Cassation,  1877,  July  9;  1879,  March  11. 
§  Pont,  N'antissement,  Sec.  1090. 


94  The   Law  of  Pledge. 

In  a  case  in  which  the  pledge  was  made  in  the 
form  of  a  sale,  the  Court  of  that  State  recognized  the 
principle  in  these  words : 

"  Neither  does  it  follow  because  parties  have  clothed 
their  contract  in  one  form  instead  of  another  that  it 
will  not  avail  in  either.  There  is  no  such  pen- 
alty declared  by  the  lawgiver,  and  the  courts  can 
not  supply  it.  Then,  is  there  anything  immoral  in 
using  the  contract  of  sale  as  the  security  of  money 
advanced  or  to  be  advanced  in  good  faith?  We  think 
not.  The  Civil  Code  has  itself  traced  certain  provi- 
sions of  law  in  regard  to  sales  with  a  power  of  redemp- 
tion.    See  Art.  2545  e/ 5^^."* 

105.  The  assignment  or  transfer  of  property  is 
necessarily  one  of  two  things :  either  it  is  merely  a 
contract  of  security,  such  as  mortgage  or  pledge,  in 
which  the  assignor  or  transferror  retains  the  owner- 
ship of  the  property,  passing  only  the  legal  title,  under 
condition,  to  the  assignee  or  transferee  for  the  pur- 
pose of  securing  a  debt ;  or  the  assignment  or  trans- 
fer passes,  not  only  the  title,  without  condition,  to  the 
assignee  or  transferee,  but  also  the  very  ownership 
of  the  property,  as  does  a  sale,  and  also,  what  the 
French  Civilians  call  a  dation  en  paietnejii,  a  giving 
in  payment,  which  is  not  securing  a  debt,  but  pay- 
ing it. 

If  the  assignment  does  not  convey  the  ownership, 
it  is  clearly   intended    and  used   for  the  purpose    of 

*  Wolf  vs.  Wolf,  12  La.  An.  531. 

See  also : 

Heber  vs.  Thompson,  47  La.  An.  SOS. 


Pledge  in  the  Form  of  Sale.  95 

securing  a  debt.  In  that  case,  if  the  thing  transferred 
is  personal  property,  the  assignment  constitutes  at 
Common  law  either  a  chattel  mortgage  or  a  pledge. 
If  the  property  is  delivered  to  the  assignee,  it  is  a 
pledge;  if  it  is  not  delivered,  it  is  a  mortgage;  pro- 
vided, of  course,  that  the  formalities  for  that  kind  of 
contract  have  been  observed. 

1 06.  The  assignment  to  the  pledgee  is  necessary  in 
many  cases  to  enable  him  to  have  not  only  the  pos- 
session, but  also  the  full  control  of  the  thing  pledged 
and  the  legal  means  to  enforce  the  pledge  by  fore- 
closure or  otherwise.  It  is  the  completion  of  the 
pledgee's  right  of  possession.  This  is  the  reason  why, 
in  the  Common  law,  tliis  mode  of  assignment  to  the 
pledgee  is  often  resorted  to.'^  It  is  not  necessary  in 
the  countries  of  Civil  law,  where  the  use  of  written 
acts  of  pledge  is  prescribed  by  law. 

But,  in  some  cases,  the  Civil  law  itself  prescribes 
that  a  pledge  be  made  by  the  transfer  of  the  thing 
pledged  to  the  pledgee.  That  is  in  the  pledge  of 
incorporeal  things,  such  as  credits  and  other  rights. 
We  have  seen  that  the  Civil  Code  of  Louisiana  pro. 
vides  that,  when  a  debtor  wishes  to  pawn  a  claim 
on  another  person,  he  must  make  a  transfer  of  it  to 
the  [>ledgee  in  the  act  of  pledge.  And  we  have 
seen  also  that  the  Code  Napoleon  provides  that  for  the 
pledge  of  credits,   an   act  in  writing,  authentic  or  pri- 


*  Jones,  on  Pledges,  Sec.  9. 
Casey  vs.  Cavaroc.  9(3  U.  S.  467. 
Clarke  vs.  Iselin,  21  Wall.  3(J0. 
Gay  vs.  Moss,  34  Cal.  125. 


96  The  Law  of  Pledge. 

vate,must  be  passed,  which  shall  transfer  the  credits  to 
the  pledgees  and  shall  be  notified  to  the  debtors  of  the 
credits.* 

107.  We  have  on  this  subject  observed  the  perfect 
contrast  of  the  Civil  law  and  the  Common  law,  in 
regard  to  this  notice ;  its  indispensability  in  the  Civil 
law  and  its  iinnecessariness  in  the  Common  law;  that 
in  the  Civil  law  the  notice  to  the  debtor  constitutes 
the  possession  of  the  credit ;  and  that  in  the  Common 
law  the  right  of  the  assignee  of  the  credit  depends  only 
upon  the  priority  of  the  assignment. f 

108.  Inasmuch  as  the  transfer  of  the  incorporeal 
things  is  prescribed  for  the  contract  of  pledge,  it  is 
evident  that  such  transfer  does  not  pass  the  owner- 
ship to  the  pledgee  but  only  the  possession  ;  that  it  is 
onl)^  a  transfer  in  g-iiarafify^  leaving  the  pledgeor  full 
owner  of  the  thing  pledged,  subject  only  to  the  con- 
ditions of  the  pledge,  t 

In  Casey  vs.  Cavaroc,  the  Supreme  Court  of  the 
United  States  said  :  ^''  in  some  cases,  such  constructive 
delivery  can  not  be  effected  without  doing  what 
amounts  to  a  transfer  of  the  property  also.  The 
assignment  of  a  bill  of  lading  is  of  that  kind.  Such 
an  assignment  is  necessary,  where  a  pledge  is  pro- 
posed, in  order  to  give  the  constructive  possession 
required  to  constitute  a  pledge  ;  and  yet  it  formallv 
transfers  the  title  also.  In  such  a  case,  there  is  a 
union  of  two  distinct  forms  of  security, — that  of  mort- 

*  Ante.  Sec.  11  et  seq. 

i  Ante,  Sec.  18. 

t  Baudry-Lacantinerie.  Xan!issoiiient.  p.  44. 


Pledge  in  the  Forbi  of  Sale.  97 

gage  and  that  of  pledge  :  mortgage  by  virtue  of  the 
title,  and  pledge  by  virtue  of  the  possession."* 

The  remark  of  the  Court  about  the  mortgrage  is 
incorrect  so  far  as  the  State  of  Louisiana  is  con- 
cerned, because  the  mortgage  of  personal  property  is 
there  unknown.  Yet  the  case  in  which  the  remark 
was  made  was  a  case  coming  up  from  that  State. 
But  the  principle  is  not  the  less  declared  by  the  Court 
that  the  transfer  of  title  is  only  a  transfer  in  guaranty, 
and  that  the  pledge  in  that  form,  which  is  that  of  a 
sale,  is  valid,  and  even  necessary  in  certain  cases. 

109.  The  written  act  of  pledge  is  clearly  the  better 
mode  of  the  pledge,  as,  in  it,  the  parties  stipulate  all 
the  terms  and  conditions  of  the  contract,  the  right  of 
the  pledgee  to  sell  at  public  or  private  sale,  with  or 
without  notice  to  the  pledgeor  ;  the  right  of  the  pledgee 
to  purchase  the  thing  pledged,  etc.  In  the  same  deed 
the  pledgeor  may  constitute  the  pledgee  himself,  or 
some  third  person,  his  agent  to  transfer  the  stock 
pledged,  or  fulfil  any  formality  necessary  to  complete 
the  title  of  the  purchaser. 

This  agent  is  the  -procurator  hi  rem  suavi  of  the 
Civil  law,  the  agent  whose  procuration  is  coupled 
with  his  own  interest  and  is  not  revocable  by  the 
principal  or  by  his  death  or  bankruptcy,  f 


*  Casey  vs.  (yavaroc,  9G  U.  S.  477. 

Ante,  p.  14. 
t  Renshaw  vs.  Creditors,  40  La.  An.  37. 

Allen,  Bush  &  West  vs.  Nettles,  39  La.  An.  791. 

Hunt  vs.  Rousmanier,  8  Wheat.  174. 


Story,  on  Agency,  See.  1G4  et  seq. 
Troplong,  Mandate,  Sees.  728,  737. 


98  The  Law  of  Pledge. 

no.  The  pledge  in  the  form  of  a  sale  is  also  objec- 
tionable because  it  contains  a  simulation,  therefore  a 
deception,  which,  on  principle,  is  always  objection- 
able, even  when  it  is  not  fraudulent. 

III.  Under  the  liberal  principle  that  the  contract- 
ing parties  may  give  to  their  agreement  the  form  and 
name  that  they  please,  if  tliird  persons  are  not 
thereb}^  injured,  and  the  laws  are  not  violated,  the 
courts  of  Louisiana  have  recently  recoo-nized  the 
validity  of  a  pledge  created  in  the  form  of  a  chattel 
mortgage,  by  a  deed  passed  in  another  State,  though 
the  chattel  mortgage,  as  such,  is  not  known  in  Louisi- 
ana.* 

But  it  would  not  be  safe  to  consider  that  this  point 
is  settled  in  that  State,  and  the  decision  is  in  direct 
opposition  to  previous  cases. j 

Indeed,  the  Court  of  Louisiana,  in  the  case  cited 
of  Delop  &  Co.  vs.  Windsor  &  Randolph,  said  :  "  As 
a  chattel  mortgage  is  unknown  to  our  law,  it  can  not 
be  enforced  in  this  State.  Movables  are  not  suscepti- 
ble of  beino;  morts^ao^ed." 

In  the  other  and  more  recent  case  alluded  to  of 
Bank  vs.  Janin,  speaking  of  a  deed  of  chattel  mort- 
Q-iXQ-Q  executed  in  the  State  of  New  York  and  the  rec- 
ognition  of  which  was  demanded  in  Louisiana,  the 
Court  said  :  "  The  act  is  given  effect  as  a  mortgage 
if  it  contains   the   essentials   of  a   mortgage,  or  of  a 


*  Bank  vs.  Janin,  40  La.  An.  1001. 
t  Delop  &  Co.  vs.  Windsor  &  Randolph.  2t)  La.  An.  1S5. 
Hughes.  Hyllested  &  Co.  vs.  Klingender  Bros..  14  La.  An.  S45. 


Pledge  in  the  Form  of  Sale.  99 

pledge  if  it  contains  as  to  form  the  requirements  of  an 
act  of  pledge." 

This  seems  to  be  a  new  direction  given  to  the  juris- 
prudence of  Louisiana  on  this  subject,  presumably 
under  the  influence  of  the  more  modern  ideas  of 
enlarging  rather  than  restricting  the  rule  of  comit}? 
between  the  States. 

112.  In  accordance  with  this  principle,  the  Court  of  the 
same  State  very  recently  decided  that  a  deed  executed 
in  Michigan,  between  citizens  of  that  State,  and  which, 
by  the  parties  to  the  contract,  was  intended  to  operate 
as  a  morto-acre  on  real  estate  situated  in  Louisiana, 
should  be  given  effect  in  the  latter  State  as  a  conven- 
tional mortgage  affecting  third  persons  after  due 
inscription.'^ 

Previous  attempts  to  have  such  deeds  enforced  in 
Louisiana  as  mortgages  on  real  estate  were  generally 
unsuccessful,  the  court  holding  that  the  Common 
law  forms   of    mortsao-es  could  not  be  recosrnized  in 

Oil  ZD 

that  State. t 

It  is  well  to  observe,  however,  that  in  recognizing 
the  validity  of  the  common  chattel  mortgage  in  Louisi- 
ana so  far  as  it  has  the  effect  of  a  pledge,  the  court 
has  not  given  it  the  full  effect  of  a  chattel  mortgage, 
inasmuch  as  the  constitutional  element  of  this  kind  of 
security  is  foreign  to  the  legislation  of  that  State,  and 
is    in    direct    conflict    with    the  pledge    of   the   Civil 


*  Gates  vs.  Gaither  et  al.,  46  La.  An.  286. 
t  Thibodaux  vs.  Anderson,  34  La.  An.  707. 

Miller  vs.  Shotwell,  3S  La.  An.  890. 

Howe  vs.  Austin  ct  als.,  40  La.  An.  323. 


100  The  Law  of  Pledge. 

law.  By  the  mortgage  of  the  Common  law  the 
legal  title  passes  conditionally  to  the  mortgagee,  and, 
if  the  property  is  not  redeemed  at  the  time  stipulated, 
the  title  becomes  absolute  at  law,  though  equity  may 
interfere  to  compel  a  redemption. 

But  if  the  mort2rag:eor  does  not  demand  the  re- 
demption,  and,  if  the  mortgagee  is  in  possession  of  the 
thing  mortgaged,  he  becomes  the  owner  of  it,  to  all 
intents  and  purposes,  by  virtue  of  the  stipulations  of 
the  mortgage.* 

113.  By  the  Civil  law  of  pledge,  on  the  contrary, 
no  title  whatever,  either  legal  or  equitable,  entire  or 
qualified,  general  or  special,  passes  to  the  pledgee. 
All  such  tenures  or  distinctions  of  property  are  un- 
known to,  and  repelled  by.  the  Civil  law.  The 
pledgee  has  simply  a  right  of  retention  on  the  prop- 
erty and  a  lien  on  its  proceeds.  But  the  title  remains 
in  the  pledgeor.  Both  the  Napoleon  Code  and  the 
Civil  Code  of  Louisiana  provide  that,  until  the 
pledgeor  is  divested  of  his  property  by  foreclosure,  if 
it  takes  place,  he  remains  tlie  owner  of  the  thing 
pledged,  which  is  in  the  hands  of  the  creditor  only  as 
rleposit  to  secure  his  lien  on  it.f 


*  Story,  on  Bailments,  Sec.  287. 
t  Civil  Code  of  Louisiana.  Art.  SIGG. 
Code  Napoleon,  Art.  2079. 


CHAPTER  VIII. 

Contracts    of   Security,    which    Are    Neither 
Pledges  Nor  Mortgages. 

114.  There  are  certain  innominate  contracts  of  a 
pignorative  character  which  are  neither  pledges  nor 
mortgages,  and  which  are  formed  under  the  provisions 
of  the  Civil  law  relative  to  the  pact  or  right  of  redemp- 
tion in  the  contract  of  sale.  Real  estate  and  not  per- 
sonal property  is  generally  the  subject  of  such  con- 
tracts of  security.  They  have  been  held  to  be  valid 
when  free  from  fraud  toward  third  persons  and  free 
from  usury  toward  the  borrower  or  debtor  in  the  trans- 
action. They  are  not  sales  because  they  do  not  trans- 
fer the  title  or  fee ;  they  are  not  pledges  or  pawns 
because  they  affect  real  estate ;  or  antichreses  because 
possession  remains  in  the  debtor;  and  they  are  not 
mortofao^es  because  in  the  Civil  law  the  title  of  the 
property  mortgaged  remains  in  the  mortgageor,  and 
not  even  a  legal  or  conditional  title  passes  to  the  mort- 
gagee. 

115.  The  pact  or  right  of  redemption  in  the  con- 
tract of  sale  of  the  Civil  law  is  not  the  same  thing  as 
the  equity  of  redemption  in  the  mortgage  of  the  Com- 
mon law.  The  Civil  Code  of  Louisiana  and  the  Code 
Napoleon  define  it  in  these  terms:  "The  right  of 
redemption  is  an  agreement  or  paction  by  which  the 
vendor  reserves  to  himself   the  power  of  taking   back 

101 


102  The  Law  of  Pledge. 

the  thing  sold  by  retaining  the  price  paid  for  it."  The 
term  fixed  for  the  redemption  can  not  exceed  ten 
years  in  Louisiana  and  five  years  in  France.  The 
delay  once  expired,  if  the  vendor  has  not  exercised 
his  right,  the  purchaser  becomes  irrevocably  the 
owner  of  the  property.  He  has  not  got  to  put  the 
vendor  in  default,  or  to  have  his  title  recognized  or 
decreed  by  any  court  of  justice  ;  nor  has  the  vendor, 
after  the  expiration  of  the  term,  any  claim  or  equitv 
of  redemption.  The  purchaser  becomes  ipso  facto 
absolute  owner.  * 

Therefore,  though  there  is  some  analog}-  between 
the  Civil  law  sale  with  right  of  redemption  and  the 
Common  law  mortgage  with  the  equitv  of  redemp- 
tion, they  are  clearly  distinct  from  each  other.  In 
the  latter  case  the  legal  title  only  passes  at  first  to  the 
mortgagee  under  a  condition,  but  not  the  fee^  though 
it  may  follow  later.  In  the  former  case,  the  fee  itself 
passes  to  the  purchaser  at  ojice  subject  to  the  resolu- 
tory condition  by  which  it  may  be  returned  to  the 
vendor.  We  have  no  reasons  to  follow  the  effects  of 
this  difference  between  the  two  systems.  My  only 
object  is  to  put  the  law  student  on  his  guard  against 
a  natural  tendency  to  confound  the  two  subjects,  and 
show  to  him  the  true  nature  of  the  Civil  law  sale  with 
right  of  redemption,  f 


*  Civil  Code  of  Louisiana,  Arts.  2567-8,  2570. 

Code  Xapoleon,  Arts.  1659,  1660.  1662. 

Troplong,  Vente,  Vol.  2.  Sec.  713. 

Laurent,  Vente,  Sees.  396,  397. 

Duranton,  Vol.  16,  Sees.  401,  402. 

Merlin,  Repertoire.  Verhn  Pignoratif. 
t  Miller  vs.  Shotwell,  38  La.  An.  890. 


Contracts  of  Security.  103 

ii6.  It  is  not  uncommon,  in  countries  of  the  Civil 
law,  for  parties  to  a  contract  of  loan  of  mone}-,  to 
use  the  form  of  a  sale  with  the  right  of  redemption 
and  disguise  thereby  the  loan  and  pignorativ^e  contract. 
The  sale  in  that  case  is  necessarily  a  simulation, 
ostensibly  transferring  the  ownership  of  the  property, 
but  in  reality  only  securing  the  creditor.  Yet,  simu- 
lated conveyances  are  legal  and  permissible  when  not 
fraudulent.  Consequently  such  contracts  of  security 
under  the  garb  of  a  sale  ma}^  be  valid,  though  to  be 
looked  upon  with  suspicion.  But  the}'  can  operate, 
as  intended  by  the  parties,  to  secure  the  creditor,  only 
so  far  as  the  parties  themselves  are  concerned.  They 
can  not  affect  third  persons  or  other  creditors  ;  they 
can  not  give  or  create  any  right  of  preference,  and  act 
as  either  pledges  or  mortgages. 

117.  Merlin  says  of  those  pignorative  contracts: 
"It  is  a  sort  of  sale  which  a  debtor  makes  of  his 
property,  with  the  stipulation  that  the  vendor  shall 
have  the  right  to  take  it  back  during  a  certain  time, 
and  that  he  will  retain  the  possession  under  a  lease, 
in  consideration  of  a  sum  of  money,  which  is  ordi- 
narily equal  to  the  interest  of  the  amount  loaned  and 
for  which  the  sale  has  been  made."* 

This  contract  is  called  ■pignorative^  because  it  only 
contains  a  simulated  sale,  and  that  its  true  object  is  to 
give  the  property  in  pledge  to  the  creditor,  and  to 
procure  to  him  the  interest  on  a  loan,  in  disguising 
the  same  under  a  different  name.     The  modern  Civil 

*  Merlin,  Repertoire,  Verho  Pignoratif . 


104  The  Law  of  Pledge. 

law  and  the  Common  law  of  old  equally   admit  that 
kind  of  contracts,  provided  they  are  not  fraudulent. 

117.  Troplong,  with  his  usual  precision  of  language, 
speaks  of  the  pignorative  contract  in  the  following 
terms:  "You  must  not  confound  the  sale  under  the 
right  of  redemption  with  the  pignorative  contract, 
which  is  nothing  but  a  disguised  contract  of  loan.  It 
is  true  that  the  latter  contains  a  sale  with  right  of 
ledemption  ;  but  it  is  complicated  with  two  other  aggra- 
vating circumstances  which  give  it  a  usurious  charac- 
ter, to-wit :  the  smallness  of  the  price  and  the  reloca- 
tion of  the  property  to  the  vendor  for  the  time  fixed 
for  the  redemption.  The  circumstance  of  relocation 
is  especially  significant  and  decisive.  It  demonstrates 
the  simulation  to  which  the  parties  have  resorted.  It 
takes  away  every  feature  of  alienation,  and  conse- 
quently of  sale,  to  an  agreement  by  which  the  pur- 
chaser is  not  put  in  possession,  leaves  the  vendor  in 
the  enjoyment  of  the  property  and  reserves  to  him  a 
way  to  resume  the  ownership  of  it."* 

118.  Inasmuch  as  the  intention  of  the  parties  in 
this  contract  and  the  object  of  the  contract  itself,  when 
it  is  a  disguised  loan,  is  only  to  simulate  a  sale,  and, 
in  reality,  to  leave  the  ownership  in  the  vendor,  their 
relations  are  those  of  debtor  and  creditor,  and  not  of 
vendor  and  purchaser,  and  are,  therefore,  governed  by 
the  principles  of  the  contract  of  loan,  and  not  by  those 
of  contract  of  sale.  Consequentl}',  if  the  property  is 
destroyed  or  damaged,  whether  in  the  hands  of  the 

*  Troplong,  Vente,  Vol.  2,  Sec.  695. 


Contracts  op  Security.  105 

vendor  or  the  purchaser,  the  loss  is  for  the  account  of 
the  borrower  and  he  remains  a  debtor,  as  in  the  case 
of  the  pledge  or  mortgage,  when  the  thing  pledged  or 
mortgaged  perishes  during  the  existence  of  the  debt. 

Another  important  consequence  of  the  disguised  loan 
is  that  the  property  does  not  belong  to  the  purchaser 
at  the  expiration  of  the  time  fixed  for  the  redemption, 
as  it  does  when  the  sale  with  the  right  of  redemption 
is  in  reality  a  sale  and  not  a  disguised  loan.  The 
pact,  in  the  case  of  the  loan,  could  not  be  enforced 
by  the  creditor,  because  it  would  be  nothing  else  than 
the  lex  commissoria  in  the  pledge,  the  forbidden  stip- 
ulation that  the  thing  pledged  will  bcome  the  property 
of  the  pledgee  in  default  of  paymenf^ 

119.  The  jurisprudence  of  Louisiana  where  the 
use  of  the  pignorative  contract  is  not  of  rare  occurrence 
has  been  fixed  in  the  same  sense.  The  Court  there 
said  :  "  Hence  it  is  that  when  the  price  is  inadequate 
and  possession  has  not  been  delivered  to  the  purchaser, 
but  was  retained  by  the  vendor,  it  has  uniformly  been 
considered  and  held  that  the  transaction  was  not  a 
sale  but  a  mere  security, — indeed,  a  sort  oi pignorative 
contract  upon  which  the  law  looks  with  suspicion,  for 
the  protection  of  the  embarrassed  and  unfortunate 
debtor  against  the  rapacity  of  his  ravenous  creditor 
Indeed  the  settled  doctrine  of  this  court  on   this  sub- 


*  Laurent,  Droit  Civil,  Vol.  28,  Sec.  380. 
Duranton,  Droit  Civil,  Vol.  16,  Sees.  391-392. 
Rogron,  Code  Civil,  Art.  1659,  p.  2184. 
Sirey,  43,  II,  32. 
Id.,  74,  I.  72. 
Dalloz,  82,  2, 15S. 


106  The  Law  of  Pledge. 

ject  is  that  redeemable  sales,  unaccompanied  by  de- 
livery of  the  thing  sold,  of  which  the  considerations 
are  inadequate,  will  be  treated  by  courts  without  suffi- 
cient evidence  to  the  contrar}^,  as  contracts  for  which 
the  thing  nominally  sold  stands  as  security^  and 
nothing  else."  * 

1 20.  We  ma}'  conclude  from  those  principles  that 
when  the  sale  with  right  of  redemption  is  a  simula- 
tion and  a  disguised  loan,  the  lender  acquires  thereby, 
even  when  the  transaction  is  lawful,  no  right  of  prefer- 
ence, privilege  or  lien,  over  the  property  or  its  proceeds, 
against  the  other  creditors  of  the  borrower,  and  that 
they  can  treat  the  property  as  still  belonging  to  their 
debtor,  and,  therefore,  seize  or  attach  it  in  the  hands 
of  the  apparent  vendor.  It  seems  clear  that  rights  of 
preference,  priority,  privilege  or  lien,  over  the  prop- 
erty of  a  common  debtor,  in  favor  of  one  creditor 
against  other  creditors,  are  created  either  by  con- 
tracts or  by  the  law.  The  contracts  of  pledge  and 
mortgage  are  the  only  ones,  at  least  under  the  Civil 
law,  by  which  a  debtor  can  give  such  rights  of  prefer- 
ence, and  we  have  seen  that  the  simulated  sale  in 
question  is  neither  a  pledge  nor  a  mortgage.  The 
rights  of  preference,  or  liens,  created  by  the  law  are 
those  specially  and  specifically  designated  by  statute, 


*  Baker  vs.  Smith,  44  La.  An.  929. 
Howe  vs.  Powell,  40  La.  An.  308. 
Lawler  &  Huch  vs.  Cos^roves,  39  La.  An.  488. 
Miller  vs.  Shotwell,  38  La.  An.  891. 
Ware  vs.  Morris,  23  La.  An.  665. 
LeBlanc  vs.  Bouchereau,  16  La.  An.  11. 
Collins  vs.  Pellerin,  5  La.  An.  99. 
Jackson  vs.  Lemle,  35  La.  An.  855. 


Contracts  of  Security.  107 

and  they  are  stricti  juris.  The  law  clearly  gives  no 
lien  to  the  simulated  purchaser  over  the  property,  as 
as:ainst  the  other  creditors  of  the  simulated  vendor. 
These  remarks  do  not  apply  to  the  Common  law  and 
its  doctrine  of  liens  in  equity. 

121.  The  contract  of  security  in  question,  a  hybrid 
transaction,  ostensibly  translative  of  property,  pignor- 
ative  in  reality,  suspicious  to  the  courts,  savoring  of 
usury,  would  probably  be  less  resorted  to  by  lenders 
of  money  if  they  realized  that  it  secures  them  against 
the  just  complaints  of  neither  the  debtor  nor  his  other 
creditors. 

There  seems  to  be  no  question  that  when  the  parties, 
for  the  purpose  of  securing  a  loan,  adopt  the  form  of 
a  sale  without  delivery  to  the  creditor,  the  latter,  even 
if  the  contract  is  free  of  fraud,  acquires  no  privilege  or 
preference  over  the  property  against  third  persons.  "^ 


'Baudry-Lacantinerie,  Xaatissement,  p.  62. 
Duranton,  Vol.  18,  No.  538. 
Aubry  et  Ran,  Vol.  4,  p.  703,  Sec.  432. 
Laurent.  Vol.  28,  Nos.  488  and  489. 


CHAPTER  IX. 

Delivery  and  Possession  of  the  Pledge. 

122.  The  pledgee  must  receive  and  retain  possession 
of  the  thing  pledged  in  order  to  render  his  lien  and 
rights  effective  against  third  persons.  The  object  of 
the  law  is  that,  by  the  possession  of  the  pledgee,  third 
persons  dealing  w^ith  the  pledgeor  should  be  informed 
and  warned  that  they  can  not  look  to  the  thing  pledged 
as  being  any  longer  part  of  the  active  assets  of  the 
pledgeor.  That  possession  must,  therefore,  be  osten- 
sible, not  ambiguous,  and  must  receive  a  certain 
publicity  or  notoriety. 

The  Court  of  Cassation,  in  France,  said  on  this 
point :  "  It  is  of  the  essence  of  the  contract  of  pledge, 
that  the  delivery  of  possession  to  the  creditor  should 
be  an  ostensible  fact,  of  a  sufficient  notoriety  to  warn 
third  persons  that  the  debtor  is  dispossessed  of  the 
thing  pledged  and  that  it  is  no  longer  part  of  his 
unencumbered  property.''* 

Troplong  says  forcibly  :  "  We  say  then  two  things  : 
it  is  that  the  debtor  must  dispossess  himself,  and  further- 
more, he  must  dispossess  himself  ostensibly,  frankly, 
without  evasion  and  without  deceptive  combinations 
which  lead  third  persons  into  error  as  to  the  real 
possessor  of  the  thing." f 

*  Laurent,  Vol.  28,  Sec.  471,  p.  464. 

t  Troplong,  Nantissement,  Sec.  298,  p.  293. 

Dallaz,  1876,  1,  219. 

Baudry-Lacantinerie,  Nantissement,  Vol.  1,  p.  47. 

109 


110  The  Law  of  Pledge. 

123.  The  Court  of  Louisiana  has  stated  the  same 
principle  in  emphatic  terms.  It  said:  "The  privi- 
lege of  pledge  is  subject  to  unbending  conditions. 
There  must  be  an  actual  delivery  in  order  that  those 
who  transact  with  the  pledgeor  may  know  that  the 
property  is  held  in  pledge.  There  should  be  no  good 
reason  to  consider  the  thing  pledged  in  the  posses- 
sion of  the  pledgeor  for  his  account  and  benefit. 
The  possession  of  the  pledgee  should  be  real  and 
effective  at  all  times.  It  must  be  apparent  and  well 
known.  It  is  essential  to  complete  a  real  right  to 
movables.  This  possession  should  not  be  equivocal 
and  so  placed  as  to  deceive  other  creditors  and  lead 
thejn  to  believe  that  the  debtor  always  continued  the 
possession."  "^ 

The  facts  of  this  case  were  briefly  as  follows  :  The 
owner  of  a  steamboat  in  Louisiana,  by  a  deed  of 
chattel  mortgage  passed  in  New  York,  mortgaged 
her  to  a  bank  of  New  York.  The  chattel  mortgage 
is  unknown  to  the  Louisiana  law,  where  only  real 
estate  may  be  mortgaged.  But  the  deed  of  chattel 
mortgage  in  this  instance  containing  all  the  elements 
of  a  pledge  under  the  laws  of  Louisiana,  the  Court  of 
that  State  recognized  its  validity  as  such.  The  boat 
in  point  of  fact  had  remained  in  the  possession  of  the 
owner  and  mortgageor  or  pledgeor,  who  agreed  with 
his  creditor,  the  New  York  bank,  to  hold  her  for  its 
account  and  as  its  agent,  and  to  lease  her  and  account 

*Bank  vs.  Janin,  46  La.  An.  1001. 


Delivery  and  Possession  op  the  Pledge.         Ill 

for  the  rent.  He  did  lease  her,  but  did  not  so  inform 
the  bank,  nor  did  he  account  for  the  rent  money. 

The  lessee  sublet  the  boat  to  a  sublessee,  who  was 
notified  by  the  bank's  counsel  that  the  boat  had  been 
in  possession  of  tlie  owner  and  pledgeor  as  agent  of 
the  pledgee,  and  that  the  sublessee  should  thereafter 
hold  her  for  account  of  the  bank.  In  the  meantime 
another  creditor  of  the  owner,  under  a  judgment  for 
debt,  caused  the  boat  to  be  seized  by  the  sheriff  and 
sold.  The  New  York  bank  intervened  and  claimed 
the  proceeds  by  virtue  of  its  pledge.  The  sole  issue 
between  the  contending  creditors  was  that  of  posses- 
sion vel  lion  in  the  pledg-ee,  such  as  to  render  the 
pledge  effective  against  third  persons.  The  court  held 
that,  under  the  circumstances  of  the  case,  the  bank  of 
New  York,  the  mortgagee  or  pledgee,  did  not  have 
such  possession. 

124.  Another  case,  also  recently  decided  by  the 
court  of  Louisiana,  shows  clearly  the  necessity  of  une- 
quivocal delivery  and  possession  to  the  pledgee,  or  to 
a  third  person  for  account  of  the  pledgee,  agreed  upon 
by  the  parties.  In  this  case  a  commission  merchant 
in  New  Orleans,  by  agreement  with  one  of  his  credi- 
tors, in  order  to  secure  him  by  a  pledge,  executed  his 
promissory  note  in  favor  of  the  creditor,  attached  to  it 
certain  bonds  and  certificates  of  stock,  placed  the  note 
and  securities  in  a  package  with  the  .creditor's  name 
on  it,  put  the  package  in  his  (the  merchant's)  box  in 
bank,  instructed  his  clerk,  who  held  the  key  of  the 
box,  to  deliver  the  package  on  demand  of  the  creditor 


112  The  Law  of  Pledge. 

whenever  called  upon  to  do  so,  and  communicated 
these  instructions  to  the  creditor.  The  package  re- 
mained in  the  box  in  bank  until  the  pledgeor's  death. 
The  pledgee  then  claimed  against  other  creditors  of 
the  deceased  merchant,  that  the  securities  in  the 
package  bearing  his  name  were  pledged  to  him  accord- 
ing to  law,  and  that,  delivery  and  possession  had 
been  made  for  his  account  to  the  clerk  of  the  mer- 
chant. It  was  held,  adversely  to  the  contention  of  the 
pledgee^  that  there  had  never  been  such  dispossession 
of  the  pledgeor,  and  such  delivery  and  possession  in 
the  pledgee,  as  could  affect  third  persons.  The  case 
was  hotly  contested  and  was  decided  by  a  divided 
Court,  on  a  rehearing,  in  which  the  Court  reversed  its 
former  judgment,  which  had  been  in  favor  of  the 
pledgee.  The  decision  rested  principally  on  the 
principle  that  the  clerk  of  the  pledgeor  had  never  had 
possession  of  the  securities  as  agent  of  the  pledgee, 
but  had  held  them  altogether  as  agent  of  the  pledgeor, 
who  never  lost  his  control  of  them.* 

125.  The  Supreme  Court  of  the  United  States,  in  a 
leading  case  coming  up  from  Louisiana,  recognized 
and  applied  the  same  principles,  and  declared  the 
pledge  of  securities  which  had  remained  under  the 
control  of  the  pledgeor  of  no  effect  so  far  as  his  other 
creditors  were  concerned.  The  rule  that  the  posses- 
sion of  the  pledgee  must  not  be  ambiguous  or  equiv- 
ocal was  there  very  clearly  shown.  The  late  Justice 
Bradley^  in   a   masterly    opinion,   expounded  in  that 

*  Succession  of  Lanaux,  46  La.  An.  1036. 


Delivery  and  Possession  of  the  Pledge.         113 

case  with  great  learning  and  ability  the  Roman,  the 
French,  the  Louisianian  and  the  Common  law  of 
pledge.  Nowhere,  perhaps,  did  that  eminent  jurist 
show  his  knowledge  of  the  Civil  law  more  conspicu- 
ously. The  facts  of  this  case  had  some  analogy  with 
those  of  the  Succession  of  Lanaux  in  this,  that  the 
securities  which  formed  the  subject  of  the  pledge  were 
placed  in  an  envelope  by  the  pledgeor  and  delivered 
for  safe  keepmg  to  his  clerk  for  account  of  the  pledgee, 
but  remained  subject  to  the  control  and  disposal  of 
the  pledgeor.  The  case  turned  and  was  decided  upon 
the  same  principle  that  the  possession  of  the  pledgee 
must  be  certain  and  not  ambiguous  and  equivocal.* 

1 26.  The  rule  that  the  possession  of  the  pledgee  must 
not  be  ambio^uous  is  so  stringent  that  in  a  case  in 
which  the  debtor,  for  the  purpose  of  securing  the  pay- 
ment of  a  loan  of  money  made  by  sundry  advances, 
agreed  to  give  his  creditor  the  entire  management  and 
control  of  a  steamship,  with  the  right  and  authority  to 
employ  all  the  officers  and  crew  necessary  to  run  her 
for  six  months,  and  to  hold  her  as  security  until  the 
loan  was  reimbursed,  the  Court  of  Louisiana  decided 
that  the  contract  did  not  constitute  a  pledge,  and  that 
the  creditor  was  not  entitled  to  a  privilege  or  prefer- 
ence in  competing  with  other  creditors.  The  decision 
is  not  convincing,  and  the  court  was  satisfied  with  the 
statement  that  such  an  agreement  could  not  be  con- 
strued   as  a   pledge.      But,  evidently,   the  conclusion 


Casey  vs.  Cavaroc,  OG  U.  S.  4()7. 


114  The  Law  of  Pledge. 

was  drawn  from  the  fact  that  the  creditor  was  not  in 
possession  of  the  vessel  though  he  had  control  of  her.* 

127.  Still  it  is  perfectly  well  established,  both  in 
the  Civil  and  the  Common  law,  that  deliver}'  of  the 
pledge  and  possession  thereof  may  be  given  to  a  third 
person  for  account  of  the  pledgee  by  agreement  be- 
tween the  parties  and  the  third  person,  chosen  by  both 
pledgeor  and  pledgee.  We  must  observe  in  that  case 
that  the  third  person  must  accept  the  charge  in  order 
to  validate  the  contract  of  pledge.  There  must  be 
between  him  and  the  parties  to  the  pledge  a  juridical 
obligation,  without  which  there  would  be  no  proper 
delivery  to  the  pledgee,  no  proper  possession  by  him 
and,  therefore,  no  legal  pledge.f 

And  the  rule  is  carried  still  further  and  will  permit 
the  pledgeor  himself  to  be,  to  a  certain  extent,  for  a 
special  purpose,  the  possessor  or  detainer  ad  hoc  of  the 
pledge  for  account  of  the  pledgee.  But  in  such  cases 
the  possession  or  detention  of  the  thing  pledged  by  the 
pledgeor  must  be  very  clearly  for  the  benefit  of  the 
pledgee. 

There  must  not  be  any  double  dealing,  or  even  the 
suspicion  of  double  dealing,  between  pledgeor  and 
pledgee,  under  penalty  of  nullity  of  the  pledge.    The 


*  Wickham  vs.  Levistones.  11  La.  An.  702. 
t  Baudry-Lacantinerie,  Nantissement,  Sec.  85. 

Troplong.  Nantissement,  Sec.  345. 

Laurent,  Nantissement,  Sec.  484. 

Code  Napoleon,  Art.  2076. 

Civil  Code  of  Louisiana,  Art.  3162. 

Woodward  vs.  Railroad  Company,  39  La.  An.  566. 

Jones,  on  Pledges,  Sec.  34. 

Schouler,  on  Bailments,  p.  181. 


Delivery  and  Possession  of  the  Pledge.         115 

principle  is  clear  and  of  easy  comprehension,  but  in 
its  application  it  often  presents  great  difficulties.  Each 
case  has  to  be  decided  according  to  its  own  facts.  It 
is  not  the  understanding  of  the  parties,  even  in  good 
faith,  that  will  validate  a  pledge  in  which  the  thing 
pledged  remains  in  possession  of  the  pledgeor,  or  is 
placed  in  that  of  a  third  person,  for  account  of  the 
pledgee.  In  point  of  fact^  such  possession  must  be 
for  the  benefit  of  the  pledgee. 

As  the  object  of  the  law  is  to  protect  other  creditors 
of  the  pledgeor  by  dispossessing  him  as  well  as  by 
possessing  the  pledgee,  it  is  evident  that  the  rule  would 
be  of  no  avail  if,  by  mere  agreement,  and  with  no 
benefit  to  the  pledgee,  and  no  deprivation  to  the 
pledg'eor,  the  pledge  was  left  in  the  latter' s  hands. 
Hence  the  numerous  cases  in  which  pledges  were 
declared  null  and  void  on  that  ground. 

128.  We  must  make,  however,  a  very  great  differ- 
ence between  the  possession  of  a  third  person  for 
account  of  the  pledgee  and  the  possession  of  the 
pledgeor  himself,  also  for  account  of  the  pledgee. 

The  possession  of  the  third  person  may  be  for  the 
whole  time  of  the  pledge  and  for  the  sole  purpose  of 
holding  it  for  the  pledgee.  But  that  of  the  pledgeor 
must  be  for  a  special  purpose  and  only  for  the  time 
necessary  for  that  purpose. 

Troplong  gives  the  instance  of  a  pledge  of  sparkling 
wines,  which  required  special  care  and  treatment, 
and  which,  for  that  reason,  were  confided  at  times  to 
the  handling  of  the  pledgeor.     This  did  not  affect  the 


116  The  Law  of  Pledge. 

validity  of  the  pledge.  That  writer  remarks:  ''We 
may  even  say,  in  a  general  way,  that  whenever  the 
assistance  of  the  pledgeor  is  necessary  for  the  better- 
ment of  the  thing  pledged,  it  must  be  permitted,  on 
condition,  however,  that  it  should  not  in  any  manner 
impair  the  possession  of  the  pledgee."* 

129.  In  another  instance  in  which  wines  of  the 
same  kind  were  pledged  with  the  understanding  that 
they  would  remain  in  the  stores  of  the  pledgeor  for  the 
purpose  of  being  taken  care  of  and  treated  or  nursed 
hy  him,  the  pledge  was  declared  null  by  the  French 
courts  on  the  ground  that  the  pledgeor  had  remained 
in  possession  of  the  wines  and  that  they  had  not  been 
separated  from  his  other  goods.  It  is  clear  that  the 
question  of  possession  in  all  such  cases  is  one  of  fact 
to  be  decided  by  the  court  or  the  jury  on  the  evidence, 
and  for  the  decision  of  which  no  fixed  rule  can  be 
established,  f 

130.  Again,  it  may  be  stipulated  in  the  contract  of 
pledge  that  the  pledgeor  shall  have  the  right  to  attend 
himself  to  the  sale  of  the  goods  pledged  and  delivered 
to  the  pledgee,  or  stored  for  his  account  in  a  public 
warehouse.  It  is  presumable  in  such  cases  that  the 
owner  and  pledgeor  can  obtain  a  better  price  for  the 
goods  than  the  creditor.  \ 


*  Troplong.  Xantissement,  Sees.  311,  312,  313.  314. 

Laurent,  Vol.  28,  Sec.  374. 

Jones,  on  Pledges,  Sec.  44. 

Schouler,  on  Bailments,  p.  181. 
t  Baudry-Lacanlinerie,  Nantissement.  Sec.  69. 
i  Troplong.  Xantisseiuent.  p.  307. 


Delivery  and  Possession  of  the  Pledge.        117 

The  rule  is  the  same  on  all  this  subject  in  the  Civil 
law  and  the  Common  law.  * 

131.  The  Court  of  Louisiana  has  established  the 
same  jurisprudence,  but  perhaps  carried  the  principle 
too  far.  In  a  case  of  the  pledge  of  certain  machinery, 
the  clerk  of  the  pledgeor  was  constituted  the  agent  of 
the  pledgee  to  hold  possession  of  the  machinery. 
With  the  consent  of  the  pledgee  the  pledgeor  was  per- 
mitted to  use  the  machinery  at  times  in  their  busi- 
ness. It  was  contended  by  other  creditors  of  the 
pledgeor  that  the  pledgee's  possession  was  not  such  as 
to  make  the  pledge  valid  against  them.  The  Court 
held  that  it  was.  It  said :  "The  possession  of  the 
property  by  the  pledgee,  as  shown,  was  sufficient. 
C.  C.  3162  ;  Weems  vs.  Moss  Company,  ;^;^  An.  973. 
In  fact^  the  property  pledged  may  be  left  in  the  pos" 
session  of  the  debtor  himself^  provided  his  possession 
is  precarious  and  clearly  for  account  of  the  creditor. 
Conger  vs.  City,  32  An.  1250.''  f 

In  the  case  of  Weems  vs.  Moss  Company,  cited  by 
the  Court,  the  pledge  had  been  placed  also  in  the 
hands  of  an  employee  of  the  pledgeor,  but  for  account 
of  the  pledgee,  and  the  Court  held  that  the  pledgeor 
was  therefore  sufficiently  dispossessed  to  render  the 
pledge  effective  against  third  persons. 

132.  We  must  observe,  however,  that,  notwithstand- 


*  Jones,  on  Pledges,  Sees.  43  and  44. 

Casey  vs.  Cavaroc,  96  U.  S.  467. 

Hilliker  vs.  Kuhn,  71  Cal.  214. 

Schouler.  on  Bailments,  pp.  181,  182. 
t  Jacquet  vs.  His  Creditors,  38  La.  An.  866. 


118  The  Law  of  Pledge. 

ins  these  declarations  of  the  Court  of  Louisiana  that  the 
pledgeor  himself  ma}'  be  directly  the  detainer  ad  hoc 
of  the  pledge  for  account  of  the  pledgee,  there  is  no 
case  in  the  Louisiana  Reports  where  this  was  actuall}- 
decreed.  The  only  case  in  which  the  pledgeor  re- 
mained the  possessor,  that  of  Conger  vs.  City  of  New 
Orleans,  also  cited  by  the  Court  in  Jacquet  vs.  His 
Creditors,  was  one  of  a  statutory,  not  contractual^ 
pledge,  and  was  decided  on  other  grounds. 

In  the  two  cases  of  Jacquet  vs.  His  Creditors, 
and  Weems  vs.  Moss  Company,  in  which  the  Court 
decreed  the  validity  of  pledges  in  which  the  clerk  of 
the  pledgeor  had  been  the  detainer  of  the  property 
pledged  for  account  of  the  pledgee,  there  was  clear  1}^ 
a  departure  from  the  principle  so  well  established, 
that  the  possession  of  the  pledgee  must  not  be  tmcer- 
taiii  or  equivocal.  The  same  Court  had,  in  its  earlier 
jurisprudence,  applied  the  rule  with  rigor  in  a  case 
in  which  the  pledgeor  had  kept  the  goods  pledged  on 
storage  in  his  own  stores,  though  for  account  of  the 
pledgee,  to  whom  he  had  given  his  receipt  for  the 
goods.  The  pledge  was  held  invalid  on  account  of 
the  character  of  the  possession.*  It  is  well  for  the 
sake  of  its  own  jurisprudence  that  the  Court  of  Louis- 
iana in  its  latest  decisions,  as  shown  by  the  two  cases 
cited  above,  of  Bank  vs.  Janin  and  Succession  of 
Lanaux,  has  returned  to  the  sound  doctrine  on  this 
subject. 

133.   As  far  as  we  could  ascertain  it,  all  the  Com- 


*  Geddes  vs.  Bennett,  G  La.  An.  51G. 


Delivery  and  Possession  of  the  Pledge.         119 

raon  law  cases  in  which  the  validity  of  the  pledge  was 
maintained  against  other  creditors,  though  the  pledgeor 
had  possession  of  the  pledge,  were  cases  in  which  his 
possession  was  for  a  specific  purpose  and,  conse- 
quently, of  limited  duration,  such  as  for  the  collection 
of  promissory  notes,  bills  or  other  securities,  or  for 
purposes  of  that  sort.  But  I  do  not  think  that 
a  pledge  was  ever  recognized  valid  against  third 
persons  by  the  courts  of  either  the  Civil  or  the 
Common  law,  when  the  pledgeor  retained  possession 
of  the  pledge  indefinitely  and  for  no  special  reason 
and  benefit  to  pledgee,  only  holding  it  for  account  of 
the  pledgee,  even  when  there  was  no  fraud  or  impo- 
sition in  the  case.  Such  a  rule  would  clearly  be  the 
reversal  and  destruction  of  the  fundamental  principle 
that  the  pledgee  must  have  possession  of  the  pledge. 
It  would  be,  in  fact,  permitting  the  parties  to  make  a 
law  of  pledge  to  themselves,  leaving  the  thing  pledged 
altogether  in  the  hands  of  the  debtor  and  thereby  de- 
ceiving and  injuring  third  persons.  As  was  well  said 
by  Justice  Bradley,  in  Casey  vs.  Cavaroc  :  ''  Bad  faith 
would  defeat  the  pledge  though  the  creditor  had  pos- 
session. But  want  of  possession  is  equally  fatal,  though 
both  parties  may  have  acted  in  good  faith.  Both  are 
necessary'  to  constitute  a  good  pledge,  so  as  to  raise  a 
privilege  against  third  persons"  (96  U.  S.,  page  490). 
134.  The  fundamental  rule  of  the  law  of  pledge 
that,  for  the  validity  of  the  contract,  there  must  be  a 
delivery  of  the  thing  to  the  pledgee,  and  that  he 
must  preserve  and  retain  the  possession  of  it  as  long 


120  The  Law  op  Pledge. 

as  his  debt  is  not  paid  and  the  contract  lasts,  that  rule 
belongs  equally ito  the  Civil  and  the  Common  law, 
and  is  of  the  essence  of  the  pledge  under  both  systems 
of  law.* 

135.  In  the  old  Roman  law,  the  pledgee  after 
receiving  possession  of  the  pledge,  could  legally 
return  it  to  the  pledgeor,  to  be  used  by  him,  either 
for  a  consideration  or  as  a  gratuity  ;  and  that  did  not 
impair  the  validit}'  of  the  pledge.  But  such  is  not, 
clearly,  the  modern  law  of  either  England  or  the 
United  States,  or  the  countries  of  the  Civil  law.f 


*  N^isbit  vs.  Trust  Company,  4  Woods,  470. 

Trust  Company  vs.  Trumbull,  137  111.  146, 

Bank  vs.  Harkness  (W.  Va.),  24  S.  E.  548. 

Abbott  vs.  Goodwin,  20  Me.  411. 

Sumner  vs.  Hamlet,  J  2  Pick.  76. 

Combs  vs.  Tutcbelt,  24  Minn.  423. 

Allen  vs.  Smith,  10  Mass    308. 

Hilliken  vs.  Kuhn,  71  Cal    214. 

Casey  vs.  Cavaroc,  96  U.  S.  467. 

Caperton  vs.  McComick  (Miss.),  22  S.  R.  60. 

Jones,  on  Pledges,  Sec.  23  et  seq. 

Storv.  on  Pledges,  Sec.  297. 
t  Pandectes  of  Pothier,  Vol.  7,  p.  360. 


CHAPTER  X. 

136.  It  is  indispensable  for  the  validity  of  the  pledge 
that  the  pledgee  should  have  possession  of  the  thing 
pledged,  but  the  law  does  not  fix  or  specify  the  time 
when  such  possession  should  begin.  The  pledgee 
may  have  had  possession  before  the  contract  of  pledge 
was  entered  into  and,  in  that  case,  the  possession  con- 
tinues ;  or  the  pledgee  may  only  receive  possession 
some  time  after  the  contract  and,  in  that  case,  the 
pledge  is  vivified  from  the  moment  of  possession.* 

The  tie  between  the«debt  and  the  pledge  does  not 
depend  upon  the  time  at  which  possession  of  the 
thing  pledged  was  given.  Whether  the  debt  is 
anterior  to  the  pledge,  and  the  latter  only  given  after- 
ward ;  or  whether  the  pledge  was  given  at  the  same 
moment  that  the  loan  was  made  ;  or  whether  the  pledge 
was  delivered  first  and  the  money  loaned  later ;  it  is 
of  no  consequence.  What  is  to  be  considered  is  that 
the  pledge  was  given  in  view  of  the  sum  paid  or  to  be 
paid ;  and  that  the  parties  meant  that  it  should  secure 
it.  The  Roman  law  provided  that  the  pledge  could 
be  given  either  for  a  contract  then  being  entered  into, 
or  for  one  already  formed.  As  said  by  Marcianus  : 
^'' Etsiiie  in  prcssenti  contractu,  sine  etiamprcBcedat.'''''^ 


*  Laurent,  Droit  Civil,  Vol.  28,  Sees.  480,  467. 

Jones,  on  Pledges,  Sees.  38,  39. 

Baudry-Lacantinerie,  Nantissement,  Sec.  69. 

Court  of  Cassation,  23d  December,  1879,  Journal  du  Palais,  1881. 
t  Troplong,  I^antissement,  Sees.  217,  274. 
121 


122  The   Law  of  Pledge. 

137.  This  principle  does  not  seem  to  have  been 
acknowledged  by  the  Court  of  Mississippi  in  the 
recent  case  of  Carpenter  vs.  McCormick,  reported  in 
the  Southern  Reporter,  Vol.  22,  p.  60.  McCormick 
had  loaned  to  the  American  Cooperage  Company  the 
sum  of  $10,000,  and  taken  as  security  therefor  a 
pledge  of  certain  cooperage  material  upon  the  grounds 
of  the  company.  To  render  the  pledge  valid  and 
effective,  the  parties  agreed  that  a  portion  of  the  land 
of  the  company  should  be  leased  to  him ;  that  some 
$12,000  worth  of  material  should  be  placed  thereon, 
with  some  distinctive  mark  on  it,  and  be  left  in  pos- 
session of  one  Hayne  as  the  agent  of  McCormick ; 
that  said  Ha3me  was  instructed  that  whenever  and  as 
often  as  any  of  said  property  should  be  used  or 
removed  by  the  company,  Hayne  should  see  that  an 
amount  of  property  of  the  same  kind  and  value 
should  be  substituted  for  the  property  so  taken ;  that 
the  substituted  property  should  be  placed  in  the  same 
location  and  be  marked  with  the  same  mark  as  the 
property  removed.  The  Court  decided  that  the 
pledge  was  invalid,  owing  to  the  equivocal  character 
of  the  possession,  and  reversed  the  judgment  of  the 
Chancellor,  who  had  decreed  the  pledge  valid. 

The  decision  of  the  Court  of  Mississippi  seems  to 
rest  upon  the  fact  that  the  pledgeor  had  the  power  to 
substitute  other  and  new  articles  to  those  originally 
pledged.  The  Court  cites  several  cases  to  support  its 
position,  in  which  it  says  there  was  no  substitution. 
But  it  does  not   cite  any  case  in  which  it  is  held  that 


Delivery  and  Possession  op  the  Pledge.         123 

the  substitution  of  a  new  thing  to  that  originally 
pledged  invalidates  the  contract  and  shows  the 
pledgee's  possession  to  be  equivocal.  The  substitu- 
tion of  the  new  thing  to  the  old  is  not  prohibited  in 
the  contract  of  pledge.  It  may  create  a  new  pledge, 
or  it  may  be  the  delivery  of  the  thing  pledged  to 
secure  a  debt  already  existing ;  or  it  ma}'  be  the  per- 
formance of  a  promise  to  deliver  the  thing  pledged 
under  the  terms  of  a  previous  contract.  But  be  it 
what  it  may,  the  moment  the  new  thing  is  placed  in 
the  hands  of  the  pledgee  or  his  agent  his  right  of 
preference  over  it  attaches  and  the  contract  is  vivi- 
fied. There  seems  to  be  nothing  in  such  an  agree- 
ment to  characterize  the  pledgee's  possession  as 
equivocal.  Indeed,  it  is  a  common  transaction  and 
mode  of  pledge  now  ot  daily  occurrence  for  bankers 
or  capitalists  to  make  advances  or  loans  of  money,  or 
to  grant  open  credits  on  collateral  securities  to  bor- 
rowers who  stipulate  that  they  mav  during  the  exist- 
ence of  the  pledge  substitute  other  or  new  securities 
to  the  original  ones  to  the  saJ:isfaction  of  the  pledgees. 
This  agreement  clearly  does  not  affect  the  character 
of  their  possession  and  impair  the  validity  of  the 
pledge. 

138.  We  should  note  that  in  the  cases  in  which  the 
pledge  was  declared  null  on  account  of  the  substitu- 
tion, it  was  because  the  thing  substituted  was  not  in 
the  possession  of  the  pledgee. 

If  the  pledge  was  null  because  the  pledgee  had  not 
possession  of  the  thing  pledged  at  the  moment  of  the 


124  The   Law  of  Pledge. 

substitution,  it  is  the  pledge  of  that  thing  which  was 
null.  The  pledge  of  the  thing  suhstituted  cz.x\  not  be 
null  for  want  oi possession  in  the  pledgee  if  the  thing  is 
then  actually  in  his  possession. 

It  is  not  the  power  of  substitution  of  the  thing 
pledged  which  could  invalidate  the  pledge.  It  is  the 
power  of  disposition  of  that  thing  reserved  in  the  con- 
tract bv  the  pledgeor.  It  is  of  the  essence  of  the 
pledge  that  the  debtor  should  be  dispossessed  of  the 
thing  pledged  ;  that  the  creditor  should  be  possessed  of 
it,  and  that  the  former  should  have  no  further  control 
or  disposition  of  it.  Consequentl}',  if  the  pledge  re- 
mains in  the  hands  of  the  pledgeor,  though  for  account 
of  the  pledgee,  and  with  the  understanding  that  the 
former  has  the  right  to  substitute,  in  his  own  hands, 
other  securities  to  the  original  ones,  it  is  clear  that  he 
has  the  right  and  power  of  disposition  of  the  thing 
pledged,  and,  therefore,  that  the  pledge  is  invalid. 
This  is  what  was  decided  by  the  Supreme  Court  of 
the  United  States  in  the  case  already  alluded  to  and 
so  often  cited  as  authority,  of  Casey  vs.  Cavaroc,  96 
U.  S.  467. 

139.  The  Court  states  the  substance  of  the  case  in 
these  words:  "  Was  there  such  a  deliver}^  and  reten- 
tion of  the  collateral  securities  as  to  constitute  a  valid 
pledge  by  the  law  of  Louisiana?  Clearly  thev  were 
never  out  of  the  possession  of  the  officers  of  the  bank 
(the  pledgeor)  and  were  never  out  of  the  bank  for  a 
single  moment,  but  were  always  subject  to  its  disposal 
in  any  mannerwhatever,whether  by  collection,  renewal, 


Delivery  and  Possession  of  the  Pledge.  125 

substitution  or  exchange  ;  and  collections,  when  made, 
were  made  for  the  benefit  of  the  bank  and  not  that  of 
the  Credit  Mobilier  (the  pledgee)." 

And  further:  "  Whether  constructive  possession  in 
the  creditor  can  be  affirmed,  where  an  article  to  which 
his  only  title  is  that  of  pledge  is  actually  re-delivered 
to  the  debtor,  with  general  authority  to  dispose  of  it 
and  substitute  another  article  of  equal  value  in  its  place, 
is  the  question  we  have  to  meet  in  this  case." 

After  reviewing  both  the  Civil  law  and  the  Common 
law  authorities  the  Court  concludes  :  ' '  On  this  ground, 
therefore,  of  want  of  possession  in  the  pledgee,  or  of 
a  third  person  agreed  upon  by  the  parties,  and  of  act- 
ual possession  and  control  in  the  pledgeor,  we  feel 
compelled  to  hold  that  the  Credit  Mobilier  (the 
pledgee)  had  no  privilege  as  to  third  persons,  and  that 
the  receiver  was  entitled  to  the  securities  in  question." 

140.  It  is  evident  that  the  case  was  decided  adversely 
to  the  pledgee  onl}^  because  the  pledgeor  had  the  con- 
trol and  power  of  disposition  of  the  collateral  securi- 
ties, which  had  remained  in  his  hands ;  and  not 
because  he  could  substitute  other  securities  to  the 
original  ones,  if  those  had  been  in  the  possession  of 
the  pledgee.  This  distinction  is  of  the  greatest  impor- 
tance in  the  pledges  securing  open  credits,  in  which 
the  debtor  reserves  the  ri^-ht  to  make  the  substitution. 
Such  cases  do  not  come  under  the  ruling  of  Casey  vs. 
Cavaroc.  In  these,  the  thing  pledged  is  in  the  hands 
of  the  creditor  when  the  debtor  offers  the  new  securi- 
ties and  makes  the  substitution.     The   new  securities 


126  The  Law  of  Pledge. 

pass  at  once  into  the  hands  of  the  creditor.  The 
transaction  does  not,  in  any  manner,  affect  or  impair 
the  validity  of  the  pledge ;  because  the  dispossession 
of  the  pledgeor  and  the  possession  of  the  pledgee  have 
never  been  interrupted,  though  the  thing  pledged  is 
changed  by  the  exchange. 

The  learned  judge  of  the  Circuit  Court  who  decided 
the  case  of  Case}"  vs.  Cavaroc  said  emphatically  that 
the  exchange  or  substitution  of  the  securities  could 
not  invalidate  the  pledge,  and  remarks  "  that  the  case 
of  Clark,  Assignee,  vs.  Iselin,  21  Wall.  360,  is  a 
pointed  authority  to  sustain  the  negative  of  this  propo- 
sition (the  impairment  of  the  pledge  by  the  substitu- 
tion), and  settles  this  objection  to  the  title  of  defendant 
conclusively  against  complainant."      2  Woods,  87. 

141.  In  Clark,  Assignee,  vs.  Iselin,  the  Supreme 
Court  of  the  United  States  decided  directly  that  the 
substitution  of  securities  did  not  impair  the  pledge. 

142.  The  rule  that  the  validity  of  the  pledge  does 
not  depend  upon  the  time  that  possession  is  given  to 
the  pledgee  ;  that  such  possession  may  be  given  at 
any  time  thereafter  (except  in  case  of  insolvency  of  the 
pledgeor),  and  that  the  right  of  preference  springs 
from  the  possession  whenever  given  ;  that  rule  is  part 
of  the  Common  law  as  well  as  of  the  Civil  law.  The 
Court  of  New  York  so  held  in  the  case  of  Parshall 
et  al.  vs.  Eggert,  54  N.  Y.  23.  The  judge  said  on 
this  point:  "I  know  of  no  authority  denying  the 
right  of  a  party  who  has  a  contract  of  pledge,  ineffect- 
ual  for  want  of  delivery,  to  obtain  a  deliver}^  at  a  sub- 


Delivery  and  Possession  op  the  Pledge.  127 

sequent  time,  and  thus  to  validate  the  pledge.  Upon 
general  principles  the  only  obstacle  which  can  prevent 
such  a  transaction  from  beinsj  effectual  must  be  the 
intervention  of  fraud."* 

143.  If  the  pledgee  had  possession  of  the  thing 
pledged  before  or  at  the  time  that  the  contract  was 
entered  into,  there  is  no  necessity  of  a  deliver}*  of  the 
pledge  by  the  pledgeor.  Such  is  the  case  if  the 
pledgee  had  it  by  virtue  of  a  loan,  or  hire,  or  deposit. 
The  nature  of  his  possession  changes  necessarily,  but 
the  possession  continues  under  the  pledge.  The  prin- 
ciple applies  also  to  the  case  of  a  broker  who  buys  stock 
for  his  customer  on  speculation,  pa^dng  for  it  with  his 
own  funds.  Either  b}^  agreement  or  by  the  Common 
law,  the  relation  of  pledgeor  and  pledgee  arises  in 
such  a  case.  The  possession  of  the  broker  is  that  of  a 
pledgee,  though  he  has  not  received  it  from  the  cus- 
tomer, who  never  was  put  in  possession  of  the  stock. f 

144.  The  delivery  and  possession  of  the  thing 
pledged  may  be  symbolical  or  fictitious  in  certain 
cases.  And  it  may  be  so  both  in  the  pledge  of  incor- 
poreal and  of  certain  corporeal  things.  Of  the  latter 
class,  goods  or  merchandise  deposited  in  stores  or 
warehouses  when  pledged  are  delivered  and  posesssion 

*  Jones,  on  Pledges,  Sec.  39. 

Boynton  vs.  Payroux,  G7  Me.  587. 

Fenby  vs.  Pritchard,  2  Sandf.  (N.  Y.)  151. 

Hilton  vs.  Tucker,  L.  R.  Chancery  Division,  ISSS,  p.  669. 

Storj',  on  Pledges,  Sec.  300. 
t  Civil  Code  of  touieiana,  Art.  3152, 

Jones,  on  Pledges,  Sec.  25. 

Edwards,  on  Bsiilinentp,  Sec.  210,  p.  170. 

Baudry-Lacantinerie,  !Niintisfi<*nient,  Sec.  Gi),  p.  4S. 

Maikham  vs.  Jaudon,  -il  N.  Y  235. 

Baker  vs.  Drake.  53  N.  Y.  An.-211. 

Gruman  vs.  Smith,  81  K.  Y.  25. 

Gillet  vs.  Whitney,  120  N.  Y.  402. 


128  The  Law  of  Pledge. 

of  them  given  to  the  pledgee  by  dehver}-  to  him  of 
the  keys  of  the  store,  if  the  goods  are  in  a  private 
store,  or  by  assignment  of  the  warehouse  receipt,  if 
the  goods  are  deposited  in  a  pubHc  warehouse.  In 
the  same  manner  the  delivery  of  merchandise  on  board 
ship,  when  pledged,  is  made  by  the  transfer  or  assign- 
ment of  the  bill  of  ladinof  which  covers  them.* 

145.  Under  a  statute  by  virtue  of  which  a  pledge 
of  ofoods  is  created  in  favor  of  the  consignee  for 
money  due  him  by  the  consignor,  the  moment  the 
bill  of  lading  is  deposited  in  the  postoffice,  or  handed 
to  the  common  carrier  for  transmission,  it  was  held 
that  the  unpaid  vendor  of  the  goods  could  not  com- 
pete with  such  consignee,  and  that  the  latter' s  privi- 
lege was  paramount  to  the  vendor's  lien.  The  deliv- 
ery of  the  pledge  is  made  by  the  special  provisions  of 
the  statute  to  consist  in  the  mailingr  of  the  bill  of 
lading,  or  the  placing  of  it  in  the  hands  of  the  com- 
mon carrier  for  transmission  to  the  consignee,  f 

146.  Some  writers  say  that,  in  such  cases,  the  keys 
of  the  store,  the  warehouse  receipts  and  the  bills  of 
lading  are  the  symbols  of  the  goods,  and  that,  by 
delivering  the  symbols  of  the  pledge,  the  pledge  itself 
is  delivered  and  possession  of  the  goods  thereby  given 
to  the  pledgee.  J 

Mr.  Jones  says  in  this  respect :  ''  Such  bills  or 
receipts  represent  the  goods  themselves,  and  the 
delivery  of  such  bills  or  receipts  as  collateral   security 


*  Baudry-Lacantinerie,  Nantissement,  p.  47. 

Pont,  Nantissement,  No.  1125. 
t  Florsheim  Bros.  vs.  Howell,  Phelps  &  Co..  33  La.  An.  11S4. 
t  Jones,  on  Pledges,  Sees.  36,  37,  "227,  228,  229, 


Delivery  and  Possession  of  the  Pledge.  129 

generally  amounts  to  a  S3'mbolical  delivery  in   pledge 
of  the  goods  themselves."" 

147.  Troplong  does  not  concur  in  this  view  of  the 
subject  and  gives  a  more  logical  and  philosophical 
reason  for  the  principle.      He  speaks  in   these  terms  : 

"  In  possessing  the  keys,  one  possesses  the  goods, 
not  because  the  keys  represent  the  goods  and  are  a  sym- 
bol of  them,  but  because  the  keys  place  the  goods  in  the 
hands  of  the  possessor,  in  such  a  way  that  he  alone 
can  dispose  of  them,  and  that  anybody  else  could  only 
do  so  burglariously.  Such  is  equally  the  part  that  n 
bill  of  lading  plays.  It  puts  the  goods  at  the  disposi- 
tion of  the  consignee  ;  it  gives  to  him  alone  the  right 
to  receive  them  ;  it  causes  him  to  hold  them  if  not 
corporeally,  at  least  virtually."* 

Ducaurroy  criticises  also  the  idea  of  the  symbolical 
delivery  by  delivery  of  the  keys  of  a  store  in  which 
the  goods  sold  or  pledged  are  contained,  and  he 
remarks  that  a  ke}'  does  not  represent  wine,  or  wheat, 
or  other  merchandise. f 

148.  But  the  principle  that,  for  the  pledge  of 
goods  in  a  store  or  warehouse,  the  delivery  of  the  keys 
of  the  building  to  the  pledgee  is  a  legal  and  sufficient 
delivery  and  possession  of  the  goods,  has  been  adopted 
bv  the  Common  law  and  the  Civil  law.;|; 

*  Troplong,  Nantissement,  Sees.  323,  324. 

Baudry-Lacantinerie,  Nantissement,  p,  47. 
t  Ducaurroy,  Instituts  Expliques,  Vol.  1,  Sec.  4(»H. 
X  Story,  oa  Bailments,  Sec.  297. 

Schouler,  on  Bailments,  Sec.  189. 

Am,  and  Eng.  Ency.  of  Law,  Verba  Pledoje,  p.  .59.5. 

Hilton  vs.  Tucker,  L.  R.  Chancery  Divi?ibn,  1888,  p.  ttfJft. 

Baudry-Lacantinerie,  Nantissement.  p.  47. 

Troplong,  Nantissement,  Sees,  323,  324. 

Duranton,  Nantissement,  Sec.  531 . 

Pont,  Nantissement,  p.  G17. 


130  The  Law  of  Pledge. 

Yet  this  doctrine  is  subject  to  contestation,  and 
some  writers  say  that  this  principle,  if  well  established, 
in  theory,  presents  difficulties  in  its  application.  The 
possession  of  the  pledgee  must  be  exclusive^  whether 
it  is  actual  or  constructive.  What  then  if  the  pledgeor 
has  a  double  key,  or  a  double  set  of  ke3's  of  the  store? 
He  is  then  himself  as  well  in  possession  of  the  goods 
as  the  pledgee,  and  can  dispose  of  them.  If  the  latter 
has  knowledge  of  this,  or  consents  to  it,  the  pledge  is 
clearly  invalid.  Furthermore,  the  possession  of  the 
pledgee  and  dispossession  of  the  pledgeor  must  be 
ostensibly  visible  to  third  parties  dealing  with  the 
latter.  It  is  not  so  when  the  goods  are  still  in  the 
store  of  the  pledgeor,  though  the  keys  may  be  in  the 
hands  of  the  creditor.  Third  persons  are  not  neces- 
sarily aware  of  this  fact. 

149.  Laurent  does  not  favor  the  doctrine  and 
argues  strongly  against  it,  as  follows:  "According 
to  Art.  1606  the  delivery  of  movable  property  is 
effected  by  the  delivery  of  the  ke^-s  of  the  building 
which  contains  it.  Does  this  suffice  for  the  pledgee 
to  be  put  in  possession,  and,  consequentlv,  that  he 
should  be  privileged  against  third  persons?  The 
authors  say  so.  Is  not  this  doctrine  too  absolute? 
The  delivery  of  the  keys  by  itself  indicates  no  change 
of  possession  ;  it  has  no  notoriety ;  it  does  not  warn 
third  persons ;  consequently  there  has  been  no  putting 
in  possession  in  the  sense  of  Art.  2076.  These  are 
decisions  in  the  adverse  sense.  The  Court  of  Aix  has 
recognized  the  privilege  of  the  pledgee  to  whom  the 
keys  of  the  store   had  been   delivered.     But  we  can 


Delivery  and  Possession  of  the  Pledge.  131 

see  by  the  facts  of  the  case  how  easy  fraud  may  be 
committed  in  such  cases.  The  debtor  had  ojranted  a 
second  pledge  on  the  same  goods  in  deUvering  the 
keys  to  the  second  pledgee,  who  thereby  was  de- 
ceived. Does  not  this  facility  to  deceive  third  persons 
by  delivering  the  keys  to  them  prove  that  this  fact 
alone  is  not  sufficient  to  constitute  possession  in  favor 
of  the  pledgee?  In  our  opinion  it  would  be  neces- 
sary that  other  facts  should  accompany  the  delivery  of 
the  keys  in  order  to  give  to  the  possession  a  public 
character.'-  * 

150.  Laurent  might  have  cited  in  support  of  his 
opinion  the  case  of  the  Bank  of  Martinique  vs. 
Thomas,  Lachanibre  &  Co.,  in  which  the  French 
Court  of  Appeal  held  exactly  the  same  po&ition  and 
decided  that  a  pledge  of  goods  was  invalid  because 
they  had  remained  in  the  store  of  the  pledgeor, 
though  the  ke3's  of  the  store  were  delivered  to  the 
pledgee.  The  Court  expressed  the  same  views  as 
Laurent  and  said  that  such  a  contract  is  occult ;  that 
third  persons  are  not  thereby  put  on  their  guard  in 
dealing  with  the  pledgeor,  whilst  the  law  demands 
that  the  dispossession  of  the  debtor  should  be  osten- 
sible, f 

151.  The  delivery  and  possession  of  corporeal  prop- 
erty to  the  pledgee  may  be  constructiv^e,  and  thereby 
sufficient,  in  some  cases  where  the  thing  pledged  is 
not  contained  in   a  building,   or  is  of  too  great  size 


*  Laurfint,  Dii  Gasje,  Sec.  473. 
t  Journal  du  Palais,  1871.  p.  1-15. 


132  The  Law  op  Pledge. 

and  weight  to  be  moved  without  trouble  and  expense. 
Thus,  it  was  held  by  American  courts  that  logs  in  a 
boom,  or  timber  or  lumber  in  a  pile,  may  be  jiledged 
by  the  pledgeor's  pointing  them  out  to  the  pledgee 
and  declaring  that  he  gives  him  possession  of  them.* 

This  principle  was  equally  acknowledged  by  the 
French  courts  in  cases  of  the  pledge  of  lumber,  but  in 
those  cases  the  pledgee  had  put  his  mark  upon  the 
lumber  in  taking  possession.f 

The  rule  is  the  same  under  the  Civil  and  the  Com- 
mon law. 

152.  The  same  rule  should  ripply  to  such  articles 
as  bales  of  cotton,  hogsheads  of  sugar,  casks  of  wine, 
barrels  of  flour,  etc.,  when  lying  on  the  quays,  or 
levees,  or  streets,  before  shipment,  or  after  delivery 
and  before  storing.  Such  goods  could  be  pledged, 
whilst  thus  13'ing  out,  and  possession  given  to  the 
pledgee  by  the  pledgeor's  pointing  them  out  and 
declaring  that  he  delivers  them  to  the  pledgee.  But 
it  would  be  safer  for  the  latter  to  put  his  mark  upon 
them  and  thus  perfect  his  constructive  possession,  as 
was  done  in  the  cases  in  which  the  French  Courts 
acknowledged  the  legality  of  the  pledge  of  lumber 
under  analogous  circumstances. t 


*  Jones,  on  Pledges.  Hec.  3(j. 

Am.  and  Eng.  Encyc.  of  Law,  Verba  Pledge,  p.  595. 

Jewett  vs.  Warren.  12  Mass.  300. 

Nevan  vs.  Roup.  8  Iowa,  207. 

Whitney  vs.  Tibbetts,  17  Wis.  359. 
t  Pont.  Xantisseiuent,  ^3ec.  1130. 

Dalloz.  2S,  1,00. 
+  Lawson,  on  Bailments,  Sec.  51. 


CHAPTER  XI. 

153.  We  have  seen  already  how  the  dehvery  of  in- 
corporeal things  is  made  and  possession  of  them  given 
to  the  pledgee ;  and  we  have  noted,  on  this  point,  the 
contrast  between  the  Civil  law  and  the  Common  law. 
In  both  systems  the  delivery  is  made  by  delivery  of 
the  title,  or  muniment  of  title,  of  the  incorporeal 
thing  or  right,  to  the  pledgee.  In  the  Common  law 
this  alone  constitutes  the  possession  of  the  pledgee, 
even  against  third  persons ;  and  in  case  the  pledgeor 
has  made  a  transfer  of  the  same  things  to  two  or  more 
persons,  the  first  transferee  in  point  of  date  is  con- 
sidered entitled  to  the  thing  pledged.'^ 

In  the  Civil  law,  so  far  as  third  persons  are  con- 
cerned, the  transfer  of  the  right  and  delivery  of  the 
deed  or  title  are  not  sufficient  to  entitle  the  pledgee  to 
the  thing  or  credit  pledged :  the  pledgee  must  more- 
over notify  the  debtor  of  the  credit,  of  the  transfer. 
It  is  this  notification  which  constitutes  the  possession 
of  the  pledgee.  So  that,  if  the  pledgeor  makes  a  second 
transfer  to  another  creditor  before  the  first  pledgee  has 
given  notice  to  the  debtor  of  the  credit,  and  the  second 
transferee  does  give  the  notice  first,  he  is  entitled  to 
the  credit  given  in  pledge,  and  the  pledge  of  the  first 
pledgee  is  fruitless. f 

*  Ante,  Sees.  11,  18. 
t  ^H<e,  Sec.  11  et  seq. 

Lee  vs.  Bradley.  8  La.  M.  57. 

Winchester  vs.  Ory,  17  La.  428, 

Deloach  vs.  Jones,  18  La.  4.53. 

Lallande  vs.  Ingram,  19  La.  An.  304. 

Troplong,  Nantissement,  Sec.  266. 

133 


134  The  Law  of  Pledge. 

The  difference  between  the  two  systems  of  law  is 
also  remarkable  in  this,  that  in  the  Civil  law,  if  the 
right  or  credit  transferred  is  not  evidenced  by  title, 
and  it  is  transferred  successivel}-  to  two  or  more  per- 
sons, it  is  the  last  transferee  who  is  considered  en- 
titled to  the  right  or  credit  transferred.* 

154.  This  rule  applies  only  to  the  transfer  and 
pledge  of  claims  and  credits.  There  can  be  no  notice 
of  transfer  of  incorporeal  things  which  are  not  credits, 
as,  for  instance,  patents  for  invention.  And  this  is  the 
reason  for  which  the  pledge  of  such  things  has  been 
declared  valid,  as  of  incorporeal  things,  without  notice 
of  the  same  to  anybodv.f 

A  consequence  of  the  principle  that  in  the  pledge  of 
rights  or  claims,  the  title  or  muniment  of  title  must 
be  delivered  to  the  pledgee,  is  that  such  rights  or 
claims  as  are  not  evidenced  or  represented  by  title 
can  not  be  pledged,  inasmuch  as  the  delivery  of  the 
title  in  such  cases  constitutes  the  dispossession  of  the 
pledgeor  and  the  possession  of  the  pledgee.  '"When 
a  credit  is  without  muniment  of  title,  it  can  not  be  the 
object  of  a  legal  pledge.  How  could  the  delivery  of  it 
be  made.?  And  when  there  is  neither  delivery  nor 
possibility  of  delivery,  how  could  the  pledge  be 
made?"  t 


*  Potbier,  De  la  Yente,  Xo.  55S. 
t  Laurent,  Dii  Gage,  8ec.  462. 

Baudry-Lacantinerie,  Du  Gage,  p.  55. 
J  Troplong,  Nantisseiiient,  Sec.  278. 

Laurent,  Du  Gage,  Sec.  477. 

Aubry  et  Rau,  VoL  4,  p.  705,  Sec.  432. 

Pont,  Du  Nantissement,  Sec.  1132. 

Baudry-Lacantinerie.  Du  Nantissement,  Sees. 


Delivery  and  Possession  of  the  Pledge.         135 

155.  Yet,  a  law  writer  of  no  insignificant  author- 
ity in  France,  Colmet  de  Santerre,  has  upheld  the 
theory  that  credits  or  claims  may  be  pledged  with- 
out delivery  of  the  muniment  of  title  to  the 
])ledgee ;  and,  consequently,  that  even  such  credits 
or  claims  as  are  not  evidenced  by  title  may  legally 
be  the  subject  of  the  contract  of  pledge.  He  bases  his 
opinion  substantially  upon  the  fact  that  the  Code 
Napoleon  prescribes  the  necessity  of  possession  for  the 
validity  of  the  pledge,  when  that  possession  is  corpo- 
real ;  that  it  does  not  provide  for  the  fictitious  posses- 
sion of  an  incorporeal  right ;  that  the  possession  of 
the  title  is  not  in  reality  the  possession  of  the  credit  or 
claim ;  and  that  the  Code  did  not  intend  to  impose 
upon  the  pledge  of  an  incorporeal  right  more  numerous 
and  difficult  formalities  than  for  the  sale  or  transfer  of 
such  rights."^'" 

This  author  seems  to  be  isolated  in  his  position  on 
this  subject,  and  the  great  majority,  if  not  the  uni- 
versality, of  French  authorities  are  opposed  to  this 
doctrine. 

156.  Baudiy-Lacantinerie  combats  it  victoriously 
and  says  that  it  is  in  opposition  to  the  traditions 
of  the  Roman  law  and  of  the  old  jurisprudence  of 
France,  which  did  not  allow  of  a  pledge  without  dis- 
possession of  the  debtor.  The  pledge  without  such 
dispossession  is  in  reality  a  mortgage.  This  security 
may  have  existed  in  Rome  under  the  name  of  -pigmis 
oppositum  and  been  subsequently  transformed  into  a 

*  Colmet  de  Santerre,  VIII,  Sec.  302. 


136  The  Law  of  Pledge. 

mortsfase,  bv  which  movable  as  well  as  immovable 
property  could  be  affected.  But  the  pledge  properly 
speaking,  the  pignus  depositmn^  has  never  taken 
place  without  the  change  of  possession  from  pledgeor 
to  pledgee,  either  in  the  Roman  law  or  the  ancient 
jurisprudence  of  France.  It  would  be  surprising  that 
the  framers  of  the  Code  should  have  admitted  this 
new  conception  without  its  being  mentioned  in  their 
preparatory  work.  On  the  contrary,  the  text  of  Art. 
2076  demands  formally  the  putting  in  possession  of 
the  creditors  in  all  cases,  as  well  when  the  object 
of  the  pledge  is  a  corporeal  thing,  as  provided  for  in 
Art.  2074,  as  when  its  object  is  an  incorporeal  one, 
such  as  a  credit,  as  provided  for  in  Art.  2075  •  '^^^ 
only  difference  is  that  the  putting  of  the  creditor  in 
possession  shall  be  effected  differently  for  the  credits 
and  for  the  corporeal  things.  For  the  credits,  it  will 
result,  conformably  with  Arts.  1607  and  1689,  from 
the  delivery  of  the  title.  Furthermore,  this  putting 
in  possession  is  a  useful  complement  of  the  publicity 
given  by  the  notification  of  the  pledge  to  the  debtor  of 
the  credit.  It  dispossesses  the  pledgee  and  takes 
away  from  hiin  the  detention  of  the  title,  which  is 
the  material  and  external  sign  of  his  right  to  the 
credit,  and  thus  contributes  in  a  great  measure  in 
warning  third  persons  It  results,  therefore,  from 
Art.  2076  that  credits  which  are  not  evidenced  by  title 
can  not  be  pledged.  It  is,  indeed,  impossible  in  such 
cases  to  put  the  creditor  in  possession  as  the  law  re- 
quires.    Third  persons  could  not  be  informed   of  the 


Delivery  and  Possession  of  the  Pledge.         137 

change  which  has  taken  place,  and  the  debtor  would 
not  be  dispossessed.* 

157.  The  reasoning  of  Colmet  de  Santerre,  that 
the  pledge  of  incorporeal  things  is  valid  without  de- 
livery of  the  title,  because  the  sale  of  such  things  is  valid 
without  the  transfer  of  the  muniments  of  title,  when 
there  are  no  muniments  of  title  attached  to  them,  and 
that  the  possession  of  the  title  is  not  in  reality  the  posses- 
sion of  the  credit  or  claim  ;  such  reasoning  suggests  the 
idea  that  the  pledge  of  rights,  credits  or  claims,  which 
are  not  evidenced  by  title,  may  perhaps  be  effected 
in  the  form  of  a  sale.  We  have  seen  before  that, 
not  only  in  the  Common  law,  but  also  in  the  Civil 
law,  according  to  the  majority  of  the  commentators 
of  the  Code  Napoleon,  and  the  jurisprudence  of 
Louisiana,  a  pledge  is  valid  if  made  in  the  form  of  a 
sale,  if  all  the  requirements  for  the  contract  of  pledge 
are  observed — that  is,  if  a  written  act  is  passed  and 
possession  given  to  the  pledgee,  and  the  transaction 
is  free  of  fraud. 

158.  A  sale  may  be  made  of  credits  which  have 
no  muniments  of  title,  because  the  delivery  and  pos- 
session to  the  purchaser  are  not  an  essential  element 
of  that  contract,  as  they,  are  of  that  of  pledge.  But, 
if  the  pledge  in  the  form  of  a  sale,  in  order  to  be 
valid  as  to  third  persons,  must  fulfil  all  the  require- 
ments of  the  contract  of  pledge,  it  is  clear  that  the 
ostensible  vendee,  in  reality  the  disguised  pledgee, 
must  be  put  in  possession  of  the  thing  pledged  under 

*  Baudry-Lacantinerie,  Du  Gage,  Sees.  74  and  75. 


138  The  Law  of  Pledge. 

the  garb  of  a  sale,  and  that  his  possession  must  be 
ostensible,  notorious  and  such  as  to  warn  third  persons. 
When  the  thing  pledged  is  a  credit  without  muniment 
of  title,  it  is  evident  that  the  pledge  of  it  in  the  form 
of  a  sale  can  have  no  effect  as  regards  third  persons. 
The  contract  is  an  innominate  one  ;  it  is  a  pignora- 
tive  transaction,  not  forbidden  by  law,  binding  upon 
the  parties  themselves,  enforceable  accordingly,  but 
giving  the  creditor  no  lien,  privilege  or  right  of 
preference.* 

159.  There  can  be  no  question  on  this  point  so  far 
as  the  Civil  law  is  concerned.  But  what  of  the  Common 
law?  Contracts  of  security  of  a  pignorative  charac- 
ter by  transfer  of  the  right,  or  credit,  or  claim  by 
the  debtor  to  the  creditor  are  of  frequent  use  in  the 
Common  law  States.  The  object  of  such  agreements 
is  to  guarantee  the  payment  of  an  obligation,  not  to 
pay  and  extinguish  an  obligation.  They  convey  an 
apparent  property,  not  the  ownership  itself.  They 
2i.Te -puYeXy  pignorative  m  their  nature.  The  parties 
call  them  pledges.  The  courts  have  in  a  number  of 
cases  held  that  the}'  were  pledges.  Are  they  so  in 
reality  when  the  rights  transferred  are  not  evidenced 
by  any  muniment  of  title  and  when,  consequently,  the 
transferees  are  not  put  in  ostensible  possession,  even 
fictitiously  or  symbolically,  and  there  are  no  possible 
external  signs  or  indications  of  that  possession.? 


Baiidry-Lacantinerie,  Xantissement,  p.  62. 
Pont,  Nantissement,  Sec.  1090. 
Duranton,  Nantissement,  Sec.  538. 
Ante,  Sec.  121. 


Delivery  and  Possession  of  the  Pledge.         139 

1 60.  In  the  Civil  law  possession  is  a  fact,  but  it  is  a 
fact  which  is  not  necessarily  rendered  manifest  or  evi- 
denced either  by  the  physical  holding  or  detention  of 
the  thing,  or  constructively  in  the  manner  prescribed 
by  law.  The  mere  enjoyment  of  a  right  may  con- 
stitute the  possession  of  it.  The  Civil  Code  of  Louis- 
iana defines  possession  in  these  words  :  ''  Possession 
is  the  detention  or  enjoymejtt  of  a  thing,  which  we 
hold  or  exercise  by  ourselves,  or  by  another  who  keeps 
or  exercises  it  in  our  name."* 

The  Napoleon  Code  defines  it:  "  Possession  is  the 
detention  or  the  enjoyment  of  a  thing  or  a  right  which 
we  hold  or  exercise  by  ourselves,  or  b}'  another  per- 
son who  holds  it  or  exercises  it  in  our  name."  f 

161.  Thus  the  legal  usufructuary  has  the  possession 
of  his  right  because  he  has  the  enjoyment  of  it ;  but 
that  right  is  not  necessarily  evidenced  by  title,  and  his 
possession    may    not    be    manifested  by  an    external 

.  "Where  a  credit  is  concerned  the  possession  does 
not  belong  to  the  person  who  holds  the  title,  but  to 
the  one  who  possesses  the  credit — that  is,  who  has  the 
enjoyment  of  it.  It  is  in  this  sense  that  the  Court  of 
Cassation  says  that  the  possession  is  not  the  simple 
detention  of  the  title,  but  the  enjoyment  itself  of  the 
thing.     Thus  the  one   who  receives   the  interest  and 


*  Civil  Code  of  JiOuisiana,  Art.  3426. 
tCode  Napoleon,  Art.  2228. 

Pothier,  De  la  Possession,  No.  2. 

Troplong,  De  la  Possession,  Sees.  217,  218. 

Marcade,  De  la  Possession,  p.  57  et  sitj. 
JKogron,  Code  Civil  Espli(iui',  Art.  2228. 


140  The  Law  op  Pledge. 

the  dividends  of  corporate  stock  has  the  possession  of 
the  stock .  * 

162.  The  subject  is  well  explained  also  by  Trop- 
long:  "Let  us  see  for  the  delivery  of  incorporeal 
rights.  By  the  Roman  law  incorporeal  rights  were 
not  susceptible  of  possession.  According  to  Juriscon- 
sult Paulus  we  could  only  possess  corporeal  things, 
■possideri  auteni  possunt  qucE  stmt  corporalia,  and  an 
incorporeal  right  escaped  possession,  (/nia  7tec  possi- 
deri iutelligitur  jus  incorpomle.  However,  as  those 
rights  had  a  real  value,  the  enjoyment  or  use  of  them 
was  called  a  quasi-possession.  In  the  French  law  we 
do  not  care  for  those  subtleties,  and  we  think  that  we 
can  possess  an  incorporeal  right  as  well  as  a  thing. 
(Art.  2228,  Civil  Code.)  We  possess  a  servitude,  a 
usufruct,  a  right  of  use,  and  there  is  a  delivery  of  such 
rights  when  the  person  for  whose  benefit  they  are 
transferred  has,  in  point  of  fact,  the  enjoyment  of 
them  by  the  consent  of  the  owner.  Ego  puto  usum 
hujus  juris  pro  traditione  possessionis  accipiendum 
esse. 

"  It  is  the  same  thing:  for  a  credit.  The  use  of  the 
right  which  it  gives,  exercised  with  the  consent  of  the 
owner  and  of  the  debtor,  is  a  positive  and  palpable 
delivery."  f 

These  principles  of  the  law  of  possession  are  cer- 
tainly true  in  both  the  Civil  and  Common  law,  though 
in  the  former  they  are  consecrated  by  statute. 

*  Laurent.  Prescription,  Vol.  32,  Sec.  557. 

Dalloz,  Prescription,  No.  270,  12th  March,  1824. 
t  Troplong,  De  la  Vente,  Vol.  1,  pp.  380,  387. 


Delivery  and  Possession  of  the  Pledge.         141 

163.  But,  when  we  come  to  the  possession  of  the 
pledgee,  the  Civil  law  demands  more.  His  posses- 
sion must  be  ostensible j  there  must  be  external  signs 
of  it ;  the  dispossession  of  the  pledgeor  must  be  such 
that  third  persons  dealing  with  him  may  be  able  to 
see  or  know  that  the  thing  pledged  is  no  longer  in 
his  hands  or  under  his  control. 

In  the  words  of  the  Court  of  Cassation  :  "  It  is  of 
the  essence  of  the  contract  of  pledge  that  the  deliver}^ 
of  possession  to  the  creditor  should  be  an  ostensible 
fact,  of  a  sufficient  notoriety  to  warn  third  persons 
that  the  debtor  is  dispossessed  of  the  thing  pledged, 
and  that  it  is  no  longer  part  of  his  unencumbered 
property."* 

And,  in  the  words  of  the  Court  of  Louisiana  :  ''The 
possession  of  ,  the  pledgee  should  be  real  and  effective 
at  all  times.    It  must  be  apparent  and  well  known. "f 

164.  The  reason  of  this  imperative  provision  of 
the  law  is  that,  if  the  possession  of  the  pledgee  was 
not  "rendered  ostensible  and  notorious^  third  persons 
could  easily  be  deceived  and  defrauded  by  the 
debtor,  inasmuch  as  the  pledge  of  commercial 
things,  at  least,  is  not  registered  like  the  mort- 
gage, in  the  books  of  the  parish  or  county,  and  the 
public  has  no  other  notice  of  it  than  by  the  posses- 
sion of  the  pledgee.  In  the  words  of  Troplong : 
"  But  where  would  we  be  if  the  pledge  of  movable 
things  could  be  made  without  delivery.^   What  frauds  ! 


*  Atitp.,  Sec.  122. 
t  AnU,  See.  123. 


142  The  Law  of  Pledge. 

What  deceptions  I  I  low  third  persons  would  be  im- 
posed upon  !"'"  Such  being  the  motive  of  the  law  in 
making  the  possession  of  the  pledgee  an  essential 
condition  of  the  legality  of  a  pledge,  and  the  condition 
being  part  of  the  Common  law  as  well  as  of  the 
Civil  law,  it  would  seem  clear  that  the  validity  of  a 
pledge  in  that  respect  should  be  tested,  under  both 
systems,  by  the  same  criterion,  to-wit :  the  publicity 
or  external  signs  of  the  pledgee's  possession.  In  that 
case,  the  pledges  of  credits  or  claims,  or  rights,  b}- 
transfer,  as  in  the  form  of  a  sale,  when  no  muniments 
of  title  are,  or  can  be,  transferred  to  the  pledgee  or 
apparent  vendee — such  transactions,  even  if  valid  and 
binding  upon  the  parties,  should  not  produce  the 
effects  of  the  contract  of  pledge  and  give  the  credi- 
tor a  right  of  priorit}'  or  preference  over  third  per- 
sons, in  the  Common  law  any  more  than  in  the  Civil 
law. 

165.  But  neither  the  courts  nor  the  law  writers  of 
the  Common  law  seem  to  acknowledge  or  recognize 
the  difference  between  the  possession  which  is  suffi- 
cient for  the  validity  of  a  sale  and  that  which  is  neces- 
sary for  the  validity  of  a  pledge  ;  and  they  ignore 
also,  consequently;  the  distinction  between  the  trans- 
fer for  the  purpose  of  a  pledge  of  an  incorporeal 
thing,  such  as  a  credit,  accompanied  with  the  deliv- 
ery of  muniments  of  title  or  vouchers,  and  the  trans- 
fer and  pledge  of  a  credit  to  which  there  is  no  muni- 
ment of  title  or  voucher. 


Troplong.  Dvi  Gage,  Soc.  298. 
Ante,  Sec.  84. 


Delivery  and  Possession  of  the  Pledge.         143 

i66.  Mr.  Schouler  says:  '^That  which  is  incapable 
of  delivery  can  not,  logically  speaking,  be  the  subject 
matter  of  a  pledge ;  but  since  money  rights,  not  ne- 
gotiable, or  mere  choses  in  action,  may  at  least  be 
assigned,  so  that  delivery  of  the  muniment  or  voucher 
shall  answer  the  purpose  of  a  bailment,  this  reserva- 
tion is  unimportant  in  modern  practice.  The  modern 
Civil  law  here  agrees  with  us  in  substance ;  and  to 
the  same  purport,  apparently^  was  the  Roman  law, 
notwithstanding  some  equivocal  expressions  in  the 
Digest."* 

The  distinguished  writer  is  not  logically  speaking. 
First,  in  the  Roman  law  there  was  no  legal  possession 
of  incorporeal  things,  and,  therefore,  none  could  be 
delivered,  and^  for  that  reason,  such  things  could  not 
be  pledged.  In  the  modern  Civil  law,  the  transfer 
or  delivery  of  possession  of  incorporeal  things  is  made 
by  delivery  of  the  vouchers  or  muniments  of  title ;'\ 
and  it  is  expressly  provided  that  such  things  may  be 
pledged  by  such  delivery.  But  there  can  be  no  pledge 
of  them  when  they  are  not  evidenced  by  title  or 
voucher.  Does  Mr.  Schouler  imply,  under  the 
maxim  Expr&ssio  2inius  est  excliisio  alteriiis,  that  the 
uo7i-delivery  of  the  muniment  or  voucher  shall  not 
answer  the  purpose  of  a  bailment.^ 

If  so,  he  is  right,  and  his  opinion  would  agree  with 
that  of  the   Civilians.      But  a   subsequent  paragraph 


*  Schouler,  on  Bailments,  p.  167. 

Troplong,  De  la  Vente,  Vol.  1,  pp.  38(),  387. 

Law  3,  Digest,  De,  aai.  punaesa. 
t  Ante,  Sec.  10. 
J  Ante,  Sec.  8. 


144  The  Law  of  Pledge. 

shows  that  he  makes  no  such  distinction.  Speaking 
of  the  pledge  of  things  /;/  fidti?'0,  he  says  :  "  The  case 
of  a  thing  not  yet  come  into  being  presents  some  dif- 
ficulty, for  equity  has  much  diluted  the  strength  of 
the  Common  law  rule  in  this  respect.  Granting  the 
rule,  it  yet  appears  that  the  chattel  product  i?i  future 
of  that  to  which  one  holds  a  right  in  esse,  like  the 
prospective  earnings  of  a  voyage,  or  of  some  existing 
contract  of  service,  the  year's  wool  on  one's  sheep, 
the  milk  from  one's  cow,  the  severed  crops  from  one's 
land,  a  reversionary  right  as  heir,  are  all  decreed 
assignable  interests  at  this  day,  and  capable  of  sale  ; 
and,  if  capable  of  sale,  they  must  be  capable  of  pledge 
or  mortc^ao-e."  ^ 

167.  This  is  clearly  a  mistake^  and  a  very  serious 
one.  First,  things  ///  futuro  can  not  be  pledged 
because  they  can  not  be  delivered. f  And,  secondly, 
all  that  may  be  sold  may  be  vi07'igaged,  because 
there  is  no  necessity  of  delivery  of  possession  in  mort- 
gage, any  more  than  in  sale.  But  all  that  may  be 
sold  may  not  be  pledged,  because  the  sale  may  be 
without  delivery  and  possession,  whilst  there  is  no 
pledge  without  possession.^ 

We  find  no  enlightenment  in  the  words  of  this  writer 
for  the  question  which  occupies  us,  to-wit :  whether 
there  is  the  same  necessity  in  the  Common  law  as  in 
the  Civil  law  of  an  ostensible  or  apparent  possession 


*  Scbouler,  on  Bailments,  p.  168. 

t  Ante.  (Sec.  28. 

i  .Fones,  on  Pledges,  Sec.  30. 

Laurent,  Du  Gage.  Sec.  472. 

Baudry-Lacantinerie,  Du  Gage.  Sec.  SS. 


Delivery  and  Possession  of  the  Pledge.  145 

in  the  pledgee  to  validate  the  pledge ;  and  hence, 
whether  the  transfer  of  incorporeal  things  or  rights 
without  muniments  of  title  or  vouchers  is  insufficient 
to  constitute  a  pledge  in  the  Common  law  as  in  the 
Civil  law. 

1 68.  Neither  Judge  Story  nor  Mr.  Jones  are  more 
explicit  on  this  point,  and  the  latter  falls  into  the  same 
error  as  Schouler  when  he  says  :  "An  actual  delivery 
of  property  capable  of  personal  possession  is  essential. 
The  delivery  must  be  such  as  would  be  requisite  to 
transfer  the  property  in  the  same  chattels  in  case  of  a 
sale  of  them."  "*  The  delivery  might  be  such  as  to 
transfer  the  property  in  case  of  a  sale,  and  yet  be  in- 
sufficient to  validate  a  pledge,  inasmuch  as  a  sale 
without  delivery  at  all  is  legal  and  a  pledge  is  not. 

There  again  the  question  is  left  untouched.  Unap- 
parent  possession  in  the  vendee  is  valid.  Is  it  so  in 
the  Common  law  pledgee? 

Judge  Story's  high  authority  is  of  no  avail  either. 
All  that  he  says  on  this  subject  is  :  "  It  is  of  the 
essence  of  the  contract  that  there  should  be  an 
actual  delivery  of  the  thing.  Until  the  delivery 
of  the  thing,  the  whole  rests  in  an  executory  con- 
tract, however  strong  may  be  the  engagement  to 
deliver ;  and  the  pledgee  acquires  no  right  of 
property  in  the  thing.  What  will  amount  to  a  de- 
livery of  the  thing  is  matter  of  law.  There  need 
not  be  an  actual  delivery,  manual  delivery  of  the 
thing.      It   is  sufficient,  if  there  are  any  of    those  acts 

*  Jones,  on  Pledges,  Sec.  23. 


146  The  Law  of  Pledge. 

or  circumstances  which,  in  construction  of  law,  are 
sufficient  to  pass  the  possession  of  the  property.  Thus 
goods  at  sea  may  be  passed  in  pledge  by  a  transfer 
of  the  muniments  of  title,  as  by  a  transfer  of  the  bill 
of  lading,  an  assignment,  etc.  So,  goods  in  a  ware- 
house may  be  transferred  by  a  symbolical  Jeliyery  of 
the  key  thereof.  So,  if  the  pledgee  has  the  thing 
already  in  possession,  as  a  deposit,  etc.,  then  the  yery 
contract  transfers  to  him  by  operation  of  law  a  virtual 
possession,  as  a  pledge,  the  moment  the  contract  is 
completed."* 

There  is  nothing:  in  those  remarks  to  inform  us 
whether  the  unapparent  possession  is  sufficient  to  ren- 
der a  pledge  yalid ;  and,  hence,  whether  incorporeal 
things  or  rights  without  muniments  of  title  can  be 
pledged  at  all  under  the  Common  law. 

169.  Yet  it  would  seem  as  if  in  the  Common  law 
States  the  written  transfer  of  a  right  or  credit  was  of 
itself  the  delivery  of  possession  to  the  pledgee,  suffi- 
cient for  the  validity  of  the  pledge,  even  without  the 
muniment  of  title.  In  such  cases,  the  possession  is 
not  ostensible  or  notorious,  and  there  is  nothing  in  the 
transaction  b}'  which  third  persons  are  put  on  their 
guard  in  their  dealing  with  the  debtor  and  pledgeor. 
It  is  clearly  against  the  principles  of  the  law  of  pledge, 
and  in  direct  opposition  to  the  rules  laid  down  by  the 
Civilians ;  but  the  point  does  not  appear  to  have 
impressed  the  minds  of  either  the  courts  or  the  text 
writers  of  the  Common  law. 

*  Story,  on  Bailments,  Sec.  297. 


Delivery  and  Possession  of  the  Pledge.         147 

170.  The  Court  of  New  York  has  said:  "■  But  it 
is  true  that  possession  must  uniformly  accompany  a 
pledge.  The  right  of  the  pledgee  can  not  otherwise 
be  consummated.  And  on  this  ground  it  has  been 
doubted  whether  incorporeal  things  like  debts,  money 
in  stocks,  etc.,  which  can  not  be  manually  delivered, 
was  the  proper  subject  of  a  pledge.  It  is  now  held 
that  they  are  so ;  and  there  seems  to  be  no  reason 
why  any  legal  or  equitable  interest  whatever  in  per- 
sonal property  may  not  be  pledged ;  provided  the 
interest  can  be  put,  by  actual  delivery  or  by  written 
transfer,  into  the  hands  or  within  the  power  of  the 
pledgee,  so  as  to  be  made  available  to  him  for  the 
satisfaction  of  the  debt.  Goods  at  sea  may  be  passed 
in  pledge  by  a  transfer  of  the  muniments  of  title^  as 
by  a  written  assignment  of  the  bill  of  lading.  This 
is  equivalent  to  actual  possession,  because  it  is  a 
delivery  of  the  means  of  obtaining  possession.  And 
debts  and  choses  in  action  are  capable,  by  means  of 
a  written  assignment,  of  being  conveyed  in  pledge."'^ 

171.  The  Court  of  California  used  the  same 
language  on  this  subject.  '''  Incorporeal  property 
being  incapable  of  manual  delivery,  can  not  be 
pledged  without  a  written  transfer  of  the  title.  Debts, 
negotiable  instruments,  stock  in  incorporated  com- 
panies, and  choses  in  action  generallv,  are  pledged 
in  that  mode.  Such  transfer  of  the  title  per- 
forms the  same  office  that  the  delivery  of  posses- 
sion does  in  case  of  a  pledge  of  corporeal   property. 

*  Wilson  vs.  Little,  2  X.  Y.  446. 


148  The  Law  of  Pledge. 

The  transfer  of  the  title,  like  the  deUvery  of  pos^eu 
sion,  constitutes  the  evidence  of  the  pledgee's  right  oi 
property  in  the  thing  pledged."  ^'' 

172.  But  in  these  two  cases,  in  which  the  pledge 
was  of  stocks,  there  were  the  muniments  of  title,  the 
certificates  of  shares,  and  the  language  of  the  Court 
was  therefore  broader  than  the  point  there  at  issue 
demanded.  The  question  can  not  be  considered  by 
an}^  means  as  satisfactorily  decided.  Yet  it  would 
seem  as  if  the  mere  written  transfer  of  a  right,  with- 
out the  muniments  of  title  when  none  exist,  would  be 
in  the  Common  law  States  a  suflScient  delivery  of 
possession  to  uphold  the  contract  of  pledge. 


♦Brewster  vs.  Hartley,  37  Cal.  25. 


CHAPTER  XII. 

173.  In  the  Civil  law,  the  possession  of  the  pledgee 
being  precarious^  as  he  does  not  possess  as  owner  of 
the  thing,  but  merely  as  a  contractual  detainer  of 
another  person's  propert}',  he  never  can  acquire  by 
occupation,  or  usucapio^  through  the  longest  prescrip- 
tion, or  statute  of  limitations,  the  ownership  of  the 
thing  pledged.  But  he  has  against  the  pledgeor  the 
correlative  ris^ht,  that  his  claim  is  not  extins^uished  bv 
the  longest  prescription  which  discharges  a  debt, 
because  the  thing  pledged,  remaining  in  the  hands  of 
the  creditor,  is  a  continuous  acknowledgment  of  the 
debt  by  the  pledgeor,  which  stops  the  course  of  pre- 
scription. 

The  first  of  these  two  principles  is  enacted  in  an 
article  of  the  Civil  Code  of  Louisiana. 

The  second  principle  is  firmly  established  by  juris- 
prudence founded  upon  the  Roman  law. 

The  article  of  the  Louisiana  Code  is  in  these  words  : 
"  The  creditor  can  not  acquire  the  pledge  by  prescrip- 
tion, whatever  maybe  the  time  of  his  possession."* 

The  Code  Napoleon  contains  no  such  provision, 
presumably  because  the  principle  is  not  absolute  in 
France,  either  as  to  the  prescript io  acquirendi  causa ^ 
in  favor  of  the  pledgee,  or  as  to  the  prescriptio  liber- 
andi  causa  in  favor  of   the  pledgeor.     The    French 


*  Civil  Code  of  Louisiana,  Art.  3175. 

149 


150  The  Law  of  Pledge. 

jurisprudence  is  meagre  on  this  subject,  and  the  law 
writers  are  divided  in  their  exposition  of  the  doctrine. 
The  substance  of  their  discussions  amounts  to  this, 
that  as  long  as  the  debt  is  not  paid,  whatever  may  be 
the  length  of  time  that  the  pledgee  has  had  the  pledge 
in  his  possession,  inasmuch  as  he  possesses  -precari- 
ously in  the  name  of  the  pledgeor,  he  can  not  acquire 
the  ownership  of  the  tiling.  The  rule  is  acknowledged 
by  all  the  French  commentators.  But,  after  the  debt 
has  been  paid,  if  the  pledgeor  leaves  his  property  in 
the  hands  of  the  pledgee,  the  latter  then  possesses  no 
longer  as  such,  and  not  even  as  a  depositary,  but  sim- 
pl}'  as  an  ordinary  possessor,  according  to  some  of  the 
most  distinguished  writers ;  and  from  that  moment 
the  -prescriptio  acqiiirendi  causa  begins  to  run  in  his 
favor,  and  the  prescriptio  liberandi  causa  against  the 
pledgeor,  who  is  creditor  of  the  claim  against  the 
pledgee  for  the  restitution  of  the  pledge ;  and  b}' 
the  prescription  of  thirty  years  under  the  French 
law,  the  pledgee  acquires  the  ownership  of  the  thing, 
and  the  pledgeor  is  debarred  of  the  right  of  demand- 
ing the  restitution  of  it.  Such  is  the  opinion  of  Du- 
ranton,  of  Troplong,  of  Baudry-Lacantinerie,  of 
Laurent,  of  Aubry  et  Rau,  and  of  Pont.  * 

174.  The  two  prescriptions,  acquirendi  causa  and 
liberandi  causa,  are  blended  in  one  article  of  the  Code 


*Duranton,  Droit  Civil,  Nantissement,  Vol.  18,  Sees.  551,  552,  553. 
Troplong,  Xantissement,  Sees.  476,  477. 
Baudry-Lacantinerie.  Xantissement,  Sees.  93.  142. 
Laurent,  Nantissement,  Sees.  417  and  525. 
Aubry  et  Rau,  Vol.  4,  p.  714,  Sec.  435. 
Pont,  Connaissement.  Sec.  1166. 


Delivery  and  Possession  op  the  Pledge.  151 

Napoleon,  for  the  prescription  of  thirty  years,  or 
rather,  the  Code  Napoleon  contains  no  provision  for 
the  prescription  acquirendi  causa  of  thirty  years 
directly  as  it  does  for  the  prescription  of  ten  years, 
but  obtains  the  same  object  indirectly  by  providing 
that  all  real  actions — that  is,  actions  to  claim  property, 
movable  or  immovable,  are  prescribed  by  thirty  years. 
The  possessor  of  thirty  years,  therefore,  acquires  the 
ownership  of  property  by  tisucapio^  inasmuch  as  all 
actions  to  impugn  his  rights  of  possession  and  occu- 
pancy are  barred. 

The  article  of  the  Napoleon  Code  is  in  these  words  : 
^ '  All  actions,  as  ivell  the  real  ones  as  the  personal  ones^ 
are  prescribed  by  thirty  years,  and  the  party  who 
pleads  that  prescription  is  not  obliged  to  show  any 
title^  nor  can  the  exception  of  bad  faith  be  opposed  to 
im.     " 

175.  The  Code  of  Louisiana,  on  the  contrary,  provides 
specifically  for  the  acquisition  of  property  by  the  pre- 
scriptio  acquirendi  causa.  It  enacts  that:  "The 
ownership  of  immovables  is  prescribed  for  by  thirty 
years,  without  need  of  title  or  possession  in  good 
faith."  And,  also:  "  When  the  possessor  of  any 
movable  whatever  has  possessed  it  for  ten  3'ears  with- 
out interruption,  he  shall  acquire  the  ownership  of  it, 
without  being  obliged  to  produce  a  title,  or  to  prove 
that  he  did  not  act  in  bad  faith."  f 

176.  But  a    very  serious   and   interesting  question 


*  Code  ISTapoleon,  Art.  2262. 

t  Civil  Code  of  Louisiana,  Arts.  3499  and  3509. 


152  The  Law  of  Pledge. 

on  this  subject  has  occupied  the  commentators 
of  the  Napoleon  Code  and  divided  them.  The 
action  of  the  pledgeor  against  the  pledgee  for 
the  restitutio7i  o^  the  thing  pledged  being  pre- 
scribed by  thirty  years  from  the  time  that 
the  debt  was  paid,  an  a,  as  in  consequence  thereof  the 
pledgee  was  no  longer  in  precarious  possession  as 
such,  can  the  pledgeor  still  claim  his  property  from 
the  former  pledgee  if  it  is  still  in  his  hands,  b}'  virtue  of 
the  action  of  revendication,  which  is  not  prescriptible 
by  any  length  of  time,  because  it  is  brought  against  a 
precarious  possessor  who  can  not  plead  an}'  prescrip- 
tion at  all? 

177.  Pont  is  of  the  opinion  that  this  last  re- 
source is  still  available  to  the  pledgeor.  He  says : 
''  But  there  remains  3'et  to  the  debtor  the  action  in 
revendication  as  long  as  the  pledge  is  still  in  the  hands 
of  the  creditor,  if,  notwithstanding  the  payment  of  the 
debt,  he  has  not  ceased  to  possess  the  thing ;  and  as 
to  that  action,  it  is  imprescriptible  on  account  of  the 
character  of  the  possession."  * 

178.  Baudr^'-Lacantinerie,  after  considering  both 
sides  of  the  question,  sa3?s  that  he  inclines  toward 
the  theory  which  allows  the  revendication  of  the 
pledgeor.  f 

179.  Duranton  ignores  the  doctrine  of  the  change 
in  the  character  of  the  pledgee's  possession  by  the 
fact  of  payment  of  the  debt,  and  therefore  considering 


'  Pont.  Xantissement,  Sec.  1166. 

t  Baudry-Lacantinerie,  Nantissement,  Sec.  93. 


Delivery  and  Possession  op  the  Pledge.         1.33 

the  possession  as  still  precarious,  recognizes  the  right 
of  the  pledgeor  to  the  action  in  revendication.  * 

780.  Laurent  is  strongly  opposed  to  the  right  of 
revendication,  which,  he  says,  does  uot  exist  in  the 
premises,  as  the  possession  of  the  pledgee  is  no  longer 
precarious  after  pa3aiient  of  the  debt,  and  he  can, 
therefore,  plead   the  prescription  of  thirty  }ears.t 

181.  The  importance  of  the  question  is  less  of  a 
practical  ttian  doctrinal  nature,  for  the  case  would 
rarely  present  itself  in  France,  no  debtor  being  likely 
to  leave  his  property  in  the  hands  of  his  creditor 
during  thirty  years  after  paying  the  debt  for  which  the 
pledge  was  given. 

182.  Could  the  same  question  be  raised  in  Louis- 
iana, where  the  law  provides  that  the  creditor  can  not 
acquire  t\\Q  pledge  by  prescription,  whatever  may  be 
the  time  of  his  possession.^  After  the  pledgee  is  paid, 
he  is  nolongera  creditor  j  and  the  thing leftinhis hands 
by  the  debtor  is  no  longer  a  pledge.  It  would  seem 
that  the  reasoning  of  the  French  commentators  would 
be  equally  applicable  to  the  law  of  Louisiana.  The 
point  does  not  appear  to  have  presented  itself  in  that 
State ;  but  such  a  case  is  more  likely  to  arise  there,  as 
the  prescription  for  the  ownership  of  movables  is  only 
of  ten  years. 

183.  As  long  as  the  pledge  remains  in  the  hands  of 
the  creditor,  the  debt  which  he  secures  can  not  be 
extinguished   by  prescription,  because  the  pledge,   in 


*  Duranton,  aSTantissement,  Sec.  552. 
t  Laurent,  Nantissement,  Sec.  525. 


154  The  Law  of  Pledge. 

that  case,  is  an  acknowledgment  of  the  existence  of 
the  debt,  which  produces  a  continuous  interruption  of 
the  course  of  prescription.  The  acknowledgment  of 
the  debt  by  the  debtor  is  one  of  the  modes  by  which 
prescription  is  interrupted.  By  leaving  the  thing 
pledged  in  the  possession  of  the  creditor,  the  pledgee 
is  presumed  not  to  have  been  able  to  withdraw  it  for 
want  of  payment,  and  he,  therefore,  tacitly  acknowl- 
edges that  the  debt  is  unpaid  and  is  still  due.  This 
principle  was  part  of  the  Roman  law,  and  is  now  part 
of  the  modern  Civil  law.  With  one  exception,  that 
of  Colmet  de  Santerre,  all  the  French  commentators 
agree  upon  the  subject.  And,  in  the  jurisprudence  of 
the  State  of  Louisiana,  the  rule  has  become  axiomatic. 
In  a  recent  case,  the  Court  of  that  State  said  :  "  The 
proposition  advanced  by  plaintiff,  that  prescription 
docs  not  run  during  the  existence  of  the  pledge,  is 
indeed  too  firmly  established  to  be  attacked."*. 

Mr.  Pont  says,  in  that  respect:  "  The  debtor  who 
leaves  the  thing  pledged  in  the  hands  of  the  creditor 
acknowledges  by  that  fact,  and  in  a  continuous 
manner,  both  his  obligation  and  the  right  of  the 
creditor,  "f 


*  Conger  vs.  Xew  Orleans,  32  La.  An.  1253. 

Wilson  vs.  Bannen,  1  Rob.  (La.)  556. 

Citizens  Bank  vs.  Knapp,  22  La.  An.  107. 

Blanc  vs.  Hertzog,  23  La.  An.  190. 
t  Pont,  Xantissement,   Sec.  1107. 

Troplong,  Nantissement,  See.  474. 

Duranton,  >Jantissement,  Sec.  553. 

Aubry  etEau,  Vol.  3,  p.  520. 

Bairiry-Lacantinerie,  Nantissement,  Sec.  102. 

Marcade,  Prescription,  p.  14G. 

Codex,  Lex  7,  Sec.  5,  De  Prescript. 

Colmet  de  Santerre,  VlII,  Sec.  312. 


CHAPTER  XIII. 

184.  The  Common  law  differs  altogether  in  the 
matter  of  prescription,  or  the  statute  of  limitations,  as 
applicable  to  the  contract  of  pledge,  from  the  Civil 
law.  Under  the  rules  of  the  Common  law  there  is  no 
limitation  to  the  right  of  the  pledgeor  to  demand  and 
recover  the  thing  pledged  on  payment  of  the  debt ;  in 
other  words,  the  right  to  redeem  the  pledge  is  never 
barred  by  any  lapse  of  time  ;  or,  in  other  words  again, 
there  is  no  prescription  acquirendi  causa  in  favor  of 
the  pledgee.  The  special  property  remains  in  him  as 
long  as  he  detains  the  pledge,  but  the  absolute  prop- 
erty, or  ownership,  never  passes  to  him  without  fore- 
closure or  transfer  and  by  the  mere  effect  of  time, 
even-  when  the  term  of  payment  was  stipulated  in  the 
contract.  Such  is  Judge  Story's  statement  of  the  prin- 
ciple of  the  Common  law  on  this  subject.  But  after 
saying  that  "prescription,  or  the  statute  of  limitations, 
does  not  run  against  it"  (the  pledgeor' s  right  to  re- 
deem), he  adds:  "However,  after  a  long  lapse  of 
time,  if  no  claim  for  a  redemption  is  made,  the  right 
will  be  deemed  to  be  extinguished ;  and  the  property 
will  be  held  to  belong  absolutely  to  the  pawnee. 
Under  such  circumstances  a  Court  of  Equity  will  de- 
cline to  entertain  any  suit  for  the  purpose  of  a  re- 
demption."* 


*  Story,  on  Bailments.  Sec.  34G. 

155 


156  The  Law  of  Pledge. 

185.  The  more  modern  jurisprudence  of  the  Com- 
mon law  does  not  seem  to  have  made  much  progress 
in  that  direction,  and  the  later  writers  do  not  throw 
more  light  on  the  subject.  Mr.  Jones  repeats,  in  sub- 
stance, the  rather  indetinite  doctrine  of  Judge  Stor}', 
that  after  a  long  lapse  of  time  without  any  claim  on 
the  part  of  the  pledgeor  to  redeem,  his  right  might  be 
deemed  to  be  extinguished  and  the  title  absolute  in  the 
pledgee.* 

And  Mr.  Schouler  tells  us  that,  strictly  speak- 
mg,  the  statute  of  limitations  does  not  run  against  a 
pledge ;  but  inasmuch  as  it  runs  against  a  pledgee's 
enforcement  of  the  secured  debt  or  engagement,  so 
will  equity  decline  to  entertain  the  pledgeor's  bill  for 
redemption,  if  he  or  his  representatives  bring  it 
unreasonably  late*  for  the  property  will  then  be  con- 
clusively presumed  to  have  vested  in  the  pledgee. f 

186.  What  measure  or  standard  of  measure  has  the 
Court  of  Equity  to  fix  the  lapse  of  time  which  will  bar 
the  pledgeor  in  the  absence  of  legislative  limitations.^ 
Will  not  the  decision  be  an  arbitrary  one,  depending 
upon  the  peculiar  idiosyncrasy  of  the  chancellor, 
however  disposed  he  may  be  to  do  justice  in  the 
premises.^ 

Well  has  Mr.  Schouler  remarked  in  closing  the  chap- 
ter of  his  Book  on  Pledge  :  "  This  whole  doctrine  of 
pledge  is  one  which  has  unevenly  developed  at  the 
Common  law ;    and   our  rules  are   frequently  derived 

*  .fones,  on  Pledges,  Sec.  581. 
t  .Schouler,  on  Bailments,  p.  225. 


Delivery  and  Possession  of  the  Pledge.  157 

from  the  Roman  law  of  pledge,  which,  however,  in 
many  points  differs  from  our  own ;  or  else  we  borrow 
from  the  analogies  of  the  chattel  mortgage."  * 

It  is  worthy  of  note  in  connection  with  this  remark 
of  Mr.  Schouler,  that  Judge  Story^  in  his  treatise  on 
Pledge,  cites  oftener  in  support  of  his  views  Pothier 
and  Domat,  the  great  Civilians,  than  the  Common  law 
authorities. 

1 87.  The  Common  law  differs  also  completely  from 
the  Civil  law  on  the  question  of  the  extinguishment 
by  prescription,  or  the  statute  of  limitations,  of  the 
debt  secured  by  the  pledge,  whilst  the  thing  pledged 
remains  in  the  hands  of  the  pledgee.  What  is  the 
rule  at  Common  law  in  this  respect  would  be  a  legal 
anomaly  in  the  Civil  law,  first,  as  to  the  pledge  re- 
maining in  existence  after  the  debt  is  barred  by  the 
limitation,  and,  secondlv,  as  to  the  debt  running  out 
of  existence,  also  by  limitation,  whilst  the  pledge  is 
alive  in  the  hands  of  the  pledgee. 

188.  The  fundamental  principle  of  the  law  of  con- 
tracts in  the  Civil  law,  and  particularly  of  the  pledge, 
mortgage  and  suretyship,  is  that  these  three  contracts 
being  merely  accessory  to  a  principal  contract,  cease 
to  exist  when  the  latter  ceases  to  exist.  They  are  in- 
tended to  secure  the  payment  of  an  obligation  ;  when 
that  obligation  goes  out  of  existence  by  payment  or 
for  any  other  reason,  the  accessory  contract  necessa- 
rily goes  out  of  existence  also  ;  it  dies  with  the  cause 
for  which  it  was  created ;   it  has  no  longer  any  office 

*  Schouler,  on  Bailments,  p.  233. 


158  The   Law  of  Pledge. 

to  fulfil  and  therefore  no  reason  to  be.  The  principle 
is  derived  from  the  Roman  law,  Cunt  causa  ■princi- 
palis lion  consistet^  ne  eaqiiidemqiice  sequtinttir  locum 
liabent.  * 

At  Common  law  the  debt  may  be  barred  by  the 
statute  of  limitations,  but  the  pledge  remains  alive  in 
the  hands  of  the  creditor  and  his  lien  upon  it  survives 
the  personal  obligation  of  the  debtor.  In  the  words 
of  the  Court  of  Massachusetts  :  "  The  pledgeor  might 
avail  himself  of  the  statute  of  limitations  as  a  defence 
to  a  suit  upon  the  note.  But  the  statute  affects  merely 
the  remedy  on  the  note,  and  does  not,  on  the  one 
hand,  defeat  the  lien  of  the  pledge  upon  the  property 
pledged,  nor,  on  the  other,  enlarge  that  lien  to  an 
absolute  title  to  the  property."  f 

In  that  case  it  was  contended  by  the  pledgeor  that 
the  note  representing  the  debt  secured,  being  out- 
lawed by  the  statute  of  limitations,  the  pledgee,  who 
had  received  after  the  note  was  barred  the  amount  of 
the  bonds  pledged.,  should  account  for  them  in  full. 
The  Couit  held  on  the  contrary  that  the  pledge  still 
subsisting,  according  to  the  principle  stated  above, 
after   the  right    to  sue  on  the    debt  was  barred,  the 


*  Pothier,  Des  Obligations,  Sec.  367. 

Civil  Code  of  Louisiana,  Arts.  3137,  313S. 

Code  Napoleon,  Art.  2012. 
t  Hancock  vs.  Franklin  Insurance  Company,  114  Mass.  156. 

Siaw^  vs.  Silloway,  145  Mass.  503. 

Lewis  vs.  Hawkins,  23  Wall.  119. 

Hardin  vs.  Boyd,  118  U.  S.  756. 

Joy  vs.  Adams,  26  Me.  330. 

Belknap  vs.  Gleason,  11  Conn.  160. 

Coldcleugh  vs.  Johnson,  34  Ark.  312. 

Hulbert  vs.  Clark  et  al.,  128  X.  Y.  295. 


Delivery  and  Possession  of  the  Pledge.         159 

pledgee  could  set  off  the  amount  due  him  and  was 
only  compelled  to  return  the  surplus  to  the  pledgeor. 

190.  Mr.  Jones  adopts  the  doctrine  declared  by  the 
Court  of  Massachusetts;  and  repeats  after  it,  that  the 
statute  affects  merely  the  personal  remedy  against  the 
pledgeor,  and  does  not  either  defeat  the  pledge  and 
the  lien  it  creates,  or  enlarge  that  lien  to  an  absolute 
title  to  the  property. 

And  the  same  writer  continues  the  statement  of  the 
rule,  and  sa3^s  that,  on  the  other  hand,  a  debtor  can 
not  by  reason  of  his  debt  becoming  barred  by  the 
statute  recover  back  the  security  pledged  ;  that  nothing 
short  of  payment  or  tender  of  the  debt  will  discharge 
the  lien  and  entitle  the  debtor  to  its  return ;  and  that 
the  statute  of  limitations  does  not  extinguish  the  debt, 
but  only  the  remedy  to  enforce  it.* 

191.  Judge  Story  seeks  his  way,  on  this  subject, 
by  meandering  between  the  Common  and  the  Civil 
law,  showing  his  ordinary  partiality  to  the  latter.  He 
treats  the  question  hypotheticall}^  and  says : 

"  If  the  right  to  the  debt  is  barred  by  prescription, 
it  is  said  in  the  Civil  law,  that  the  right  to  the  pledge 
is  gone  also.  This  would  be  true  in  the  Common 
law  also,  when  from  the  length  of  time  there  arises  a 
prescription  of  the  payment  of  the  debt.  But,  it  there 
is  merely  a  positive  bar  by  the  statute  of  limitations 

*  Jones,  on  Pledges,  Sec.  5S1  and  582. 
Lawson,  on  Bailments,  Sec.  70,  No.  5. 
Am.  and  Eng.  Ency.  of  Law,  Verba  Pledge,  p.  734. 
•fones,  on  Mortgages,  Sec.  1204  et  seq. 
Edwards,  on  Bailments,  Sees.  249  and.  323. 
Chitty,  on  Contracts,  4th  Am.  Edition,  p.  427. 
Parsons,  on  Contracts,  6th  Edition,  p.  108. 


160  The  Law  of  Pledge. 

against  a  personal  action  for  the  debt,  it  may  deserve 
consideration,  how  far  this  will  oust  the  party  of  his 
right  to  retain  the  pledge  toward  satisfaction  of  the 
debt :  for  the  possession  of  the  pledge  may  be  the 
very  reason  wh}-  the  pledgee  has  omitted  to  bring  a 
personal  suit  for  the  debt  within  the  prescribed  time. 
The  pledger  is  not  ordinarily  barred  of  his  right  to 
redeem  the  pledge,  so  long  as  the  pledgee  may  be 
presumed  to  hold  it  as  a  pledge.  And  the  continued 
possession  of  the  pledgee,  under  such  circumstances, 
affords  proof  of  the  non-extinguishment  of  the  debt, 
although  the  statute  of  limitations  may  present  a  bar 
to  a  mere  personal  action.  On  the  other  hand,  if  a 
very  long  period  has  elapsed,  and  the  pledge  has  con- 
tinued in  the  possession  of  the  pledgee,  it  affords  a 
presumption  of  an  abandonment  of  it  b}-  the  pledger, 
and  if  any  presumption  of  an  extinguishment  arises 
in  such  a  case,  it  is  an  extinguishment  by  receiving  the 
pledge  in  satisfaction.  If,  then,  the  statute  of  limi- 
tations has  run  against  the  debt,  as  a  personal  claim, 
and  the  pledger  seeks  to  recover  back  the  pledge, 
why  mav  not  the  pledgee  avail  himself  of  the  pro- 
tection of  the  same  statute  to  bar  such  suit.^ 
And  if  the  pledger  insists  that  it  is  still  a 
pledge,  why  may  not  the  other  part}'  avail  himself 
of  all  the  fair  presumptions  arising  in  the  case,  that 
the  debt  has  not  been  in  fact  paid,  or  that  the  pledge 
has  been  deemed  a  satisfaction  of  it.-*  Some  of  the 
adjudged  cases  seem  silently  to  admit  the  existence  of 
a  right  in  the  pledgee  over  the  pledge  notwithstand- 
ing the  lapse  of  a  period  exceeding  that  of  the  statute 


Delivery  and  Possession  of  the  Pledge.  TGI 

of  limitations  for  personal  recoveries.  This  however 
must  be  considered,  in  the  absence  of  direct  authorit}-, 
as  a  point  merely  propounded  for  further  considera- 
tion. But  if  the  pledger  admits  the  existence  of  a 
debt,  and  brings  a  bill  to  redeem,  he  can  do  so  only 
upon  payment  of  the  debt,  although  the  statute  of  lim- 
itations might  otherwise  be  pleaded  as  a  bar  to  it."* 

192.  The  doubt  thus  expressed  by  Judge  Story  as 
to  the  continued  existence  of  the  pledge  when  the 
personal  right  of  action  on  the  debt  is  barred  by  the 
statute  of  limitations,  has  been  solved  by  the  subse- 
quent adjudications,  as  we  have  seen. 

193.  However  different  the  Civil  and  the  Common 
law  are  on  this  point,  they  each  have  their  logic  and 
their  rationale^  and  the  difference  comes  from  the 
difference  in  their  law  of  prescription,  or  limitation. 
The  Civil  law  prescription  libera?idi  causa  is  based 
upon  the  presumption  of  payment.  The  presump- 
tion is  juris  et  de  jure.  It  is  not  rebuttable  by  proof 
to  the  contrary.  The  law  presuming  pa3'ment  ex- 
tinguishes the  debt  itself.  It  does  not  merely  destroy 
the  right  of  suing  upon  it.  There  being  no  principal 
obligation  left,  when  the  debt  is  prescribed,  clearly  the 
pledge,  the  only  purpose  of  which  was  to  secure  the 
obligation,  can   not  outlive   it  and   must  go  with  it.  f 

*Sforj',  on  Bailments,  Sec.  362. 

t  Doniat,  2  Vol.,  I)es  Prescriptions,  p.  208. 

Pothier,  Des  Obligations,  2  Vol.,  pp.  149,  15(3. 

Marcade,  Prescription,  p.  178. 

Troplong,  Prescription,  2  Vol.,  pp.  387  et  seq. 

Laurent,  Prescription,  Sec.  372. 

Code  Napoleon,  Art.  2262. 

Civil  Code  of  Louisiana,  Arts.  3528,  3530. 

Brown  vs.  Insurance  Co.,  3  La.  An.  183. 


1G2  The  Law  of  Pledge, 

The  statute  of  limitations,  on  the  contrary,  only  takes 
away  from  the  creditor  the  right  and  the  power  to  sue 
his  debtor  for  payment  of  the  debt.  The  debtor  is 
personally  put  beyond  the  reach  of  his  creditor  so  far 
as  suit  and  judgment  against  him  are  concerned.  But 
the  obligation  itself  is  not  extinguished,  because  the 
statute  is  not  based  upon  a  presumption  of  payment, 
and  does  not  discharge  the  debt.  Both  the  Civil  law 
and  the  Common  law  statutes  are  statutes  of  repose 
in  this,  that  they  are  intended  to  quiet  persons  and 
settle  titles  ;  but  their  reasons  are  not  the  same  and 
their  effects  are  not  the  same.  The  Civil  law  remedy 
goes  much  farther  than  that  of  the  Common  law. 

194.  As  to  the  principle  of  the  law  of  contract, 
that  the  accessory  falls  with  the  principal,  and  that  the 
pledge,  mortgage  or  suretyship  falls  with  the  princi- 
pal obligation  which  it  secures,  there  can  be  no  differ- 
ence between  the  two  great  S3-stems  of  law,  because 
both  are  founded  upon  the  same  rules  of  reason.  It 
is  clear,  therefore,  that,  at  Common  law  as  well  as  in 
the  Civil  law,  when  the  debt  secured  is  absolutelv  ex- 
tinguished,  either  by  pa3'ment  or  otherwise,  the  pledge 
itself  is  extinguished,  and  the  pledgee  is  bound  to  return 
the  thing  pledged.  On  this  point.  Judge  Story  is  posi- 
tive. ''So,  whatever  by  operation  of  law  extinguishes 
the  debt,  extinguishes  the  right  to  the  pledge.  There- 
fore, if  in  a  suit  for  the  debt  the  pledger  has  a  judg- 
ment in  his  favor,  which  bars  anv  future  recovery  of 
the  debt,  that  extinguishes  the  right  to  the  pledge.''* 

*  Story,  on  Bailments,  Sec.  361. 
Schouler,  on  Bailments,  p.  233. 
Edwards,  on  Bailments.  Sec.  309. 


Delivery  and  Possession  of  the  Pledge.         163 

195.  We  must  now  consider  the  further  difference 
between  the  Civil  and  Common  law  as  to  the  lesral 
consequence  of  the  thing  pledged  remaining  in  the 
hands  of  the  pledgee  after  the  debt  secured  has  matured 
and  been  unpaid,  and  the  effect  of  this  fact  on  the  pre- 
scription of  the  obligation.  We  have  already  seen 
before,  that  in  the  Civil  law  the  presence  of  the  pledge 
in  the  hands  of  the  pledgee  is  an  acknowledgment  by 
the  pledgeor  that  the  debt  is  not  paid,  sufficient  to 
produce  a  continuous  interruption  of  the  prescription.* 

196.  It  is  not  so  at  Common  law.  There,  the  con- 
tinued possession  of  the  pledgee  does  not  interrupt  or 
2:0  counter  to  the  bar  of  the  statute  of  limitations.  The 
reason  of  this  is  that,  in  order  to  take  the  case  out  of 
the  statute,  there  must  be  a  new  promise  on  the  part 
of  the  debtor  to  pay  the  old  debt,  or  at  all  events  an 
acknowledgment  which  is  equivalent  and  amounts  to 
a  new  promise.  And  such  acknowledgment  or  new 
promise  must  be  in  writing  and  must  be  expressed 
and  positively  declaratory  of  the  intention  of  the  debtor 
to  pay  the  debt.  Such  was  the  law  of  England  under 
the  statute  9  George  IV,  C.  14  ;  and  a  similar  require- 
ment is  made  in  most  of  the  States  of  the  Union. f 

It  is  evident  that  these  conditions  necessary  to 
remove  the  bar  of  the  statute  of  limitations  do  not 
exist  by  the  mere  possession  of  the  pledgee  after  the 
maturity  of  the  debt.  J 


*  Ante,  Sec.  183. 

t  Parsons,  on  Contracts,  Vol.  3,  6th  edit.,  p.  73. 

Chirtj',  on  Contracts,  4th  Am,  edit.,  p.  639. 
X  Edwards,  on  Bailments,  Sec.  32:-5. 


164  The  Law  of  Pledge. 

197.  By  the  Civil  law,  the  bar  being  based  on  the 
presumption  of  payment,  any  acknowledgment,  express 
or  tacit,  from  the  debtor  that  the  debt  is  not  paid  is 
sufficient  to  interrupt  the  course  of  prescription.  The 
acknowledgment  may  not  be  accompanied  by  a  prom- 
ise or  even  an  intention  to  pav  the  debt. 

198.  By  the  Common  law  the  bar  being  entirelv  a 
statute  of  repose,  intended  to  relieve  the  debtor 
whether  the  debt  is  paid  or  not,  and,  therefore,  not 
based  upon  the  presumption  of  payment,  the  acknowl- 
edgment of  the  existence  of  the  debt,  whether  express 
or  tacit,  unless  it  contains  the  intention  to  pay,  pro- 
duces no  effect  asfainst  the  course  of  the  statute. 


CHAPTER  XIV. 
Rights  and  Obligations  of  the  Pledgee. 

199.  The  contract  of  pledge  is  an  accessory  one,  as 
it  only  takes  place  to  secure  a  principal  obligation  ; 
but  it  is  at  the  same  time  what  the  Civilians  call  a 
unilateral  contract ;  that  is,  a  contract  in  which  one 
part}'^  alone  binds  himself  to  the  performance  of  the 
obligation.  In  the  contract  of  pledge,  it  is  the  pledgee 
who  binds  himself ;  the  pledgeor  does  not.  The 
latter  is  already  bound  to  the  payment  of  his  debt ; 
but  he  does  not  bind  himself  any  more  or  further  in 
securing  it  by  the  pledge  ;  he  only  binds  his  prop- 
erty, the  thing  pledged  ;  he  incurs  no  additional  per- 
sonal obligation.  It  is  the  pledgee  who  binds  himself 
to  return  the  pledge  on  payment  of  his  claim,  and,  in 
the  meantime,  to  take  proper  care  of  it.  Such  is  the 
opinion  of  Laurent.* 

But  Pothier,  Troplong,  Baudry-Lacantinerie,  and 
generally  the  other  French  law  writers,  do  not  agree 
with  Laurent  on  this  point,  and  think  that  the  con- 
tract of  pledge  is  an  imperfect  synallagmatic  contract, 
because  the  pledgeor  is  also  interested  in  it  to  the  ex- 
tent of  obtaining  credit,  and  is  bound  by.  the  obliga- 
tion of  refunding  to  the  pledgee  the  necessary  expenses 
for  the  preservation  of  the  thing  pledged,  like  the  de- 


*  Laurent.  Xantissemeat,  Sec.  487. 

165 


166  The  Law  of  Pledge. 

positor  in  the  contract  of  deposit.  *  The  question  is, 
at  all  events,  purely  doctrinal  and  of  no  practical  im- 
portance. 

200.  The  pledgee  has,  therefore,  duties  and  obliga- 
tions as  well  as  rights  in  the  contract  of  pledge.  Let 
us  see  what  those  rights  and  those  obligations  are. 

The  object  of  the  pledge  is  to  secure  the  creditor 
and  to  give  him  a  right  of  priority  and  preference 
over  the  other  creditors  of  the  pledgeor  in  the  pro- 
ceeds of  the  thing  pledged.  This  privilege  or  prefer- 
ence is  therefore  the  first  right  of  the  pledgee.  But 
he  has  it  against  those  other  creditors  only  if  he  has 
possession  of  the  pledge,  and  under  the  rule  of  the 
Civil  law,  when  a  written  act  of  pledge  is  necessary, 
only  if  such  act  has  been  passed  and  recorded.  This 
lien,  called  -privilege  by  the  Civilians,  is  a  real  right, 
which  does  not  result  from  the  nature  of  the  debt,  as 
privileges  generally  do,  but  arises  from  the  contract  of 
pledge  itself  and  the  fact  of  delivery  and  possession 
combined.  Moreover,  it  is  not,  as  in  the  Common  law 
mortgage,  a  right  of  property  in  the  thing  pledged, 
but  only  a  right  of  preference  in  its  proceeds. 

Between  the  pledgee  and  the  other  creditors,  pos- 
session, and  the  written  act  in  the  Civil  law  countries 
except  in  commercial  pledges,  are  indispensable  to 
create  the  lien  or  privilege ;  but  not  so  between 
the    pledgee    and    pledgeor.     As  to    them    the    mere 


*  Pothier,  Xantisseiiient,  Sees.  14,  15. 
Troplong,  Nantissement,  Sees.  31,  32. 
Baudrv-Laeaiitinerie,  Xantissement,  Sec.  7. 
Pout,  is'antissement,  Sec.  1067. 


Rights  and  Obligations  of  the  Pledgee.  167 

agreement  makes  a  valid  pledge  if  accompanied 
by  delivery.  If  the  pledgee  has  been  put  in  pos- 
session, he  may  retain  it  until  he  is  paid ;  if  he 
has  not  been  put  in  possession,  he  has  an  action 
to  compel  the  debtor  to  comply  with  the  terms  of  the 
agreement  and  to  deliver  the  pledge.  But  this  has 
been  considered  and  declared  to  be  a  promise  of 
pledge,  but  not  a  pledge.  The  promise  is  enforceable 
by  law,  either  by  specific  performance,  or  by  a  claim 
for  damages  ;  but  the  creditor  has  no  lien  or  right  of 
preference  in  the  meantime  on  the  thing  which 
formed  the  subject  of  the  promise  of  pledge. 

The  constitutive  elements  of  the  contract  of  pledge 
being  the  same  in  the  Civil  and  in  the  Common  law, 
the  two   systems  are  in  harmony  upon  this  point.* 

201.  Yet,  the  promise  to  affect  some  specific  prop- 
erty to  the  payment  of  a  specific  debt  may  give  to  the 
creditor  a  right  to  an  equitable  lien  under  the  rules  of 
the  Common  law.  Such  equitable  lien  is  unknown  to 
the  Civil  law.  This  will  be  the  subject  of  a  subse- 
quent chapter. 

202.  The  thing  -pledged being  -put  in  the  possession 
of  the  pledgee,  is  in  his  hands  in  the  nature  of  a 
deposit.  He  must  take  care  of  it  and  preserve  it  as  a 
depositary  must  do  of  the  thing  deposited.  Has  he 
the  riffht  to  make  use  of  it?      Here   the  Civil  law  and 


Troplong,  Nantissement,  Sees.  2,  237. 

Jones,  on  Pledges,  Sees.  27,  28,  29. 

Succession  of  D'Meza,  26  La.  An.  35. 

Baudry-Lacantinerie,  Nantissement,  Sec.  7. 

Pothier,  Nantissement,  See.  9. 

Am.  and  Eng.  Encyc.  of  Law,  Pledge,  p.  596,  Notes. 


168  The  Law  of  Pledge. 

the  Common  law  disagree.  On  principle,  and  under 
the  unanimous  authorit}-  of  the  Civilians,  we  should 
say  that  the  pledgee  has  no  more  right  to  use  the 
pledge  than  the  depositary  has  the  right  to  make  use 
of  the  thing  deposited. 

203.  The  French  Code  provides  that:  "  Until  the 
expropriation  of  the  debtor,  if  it  take  place^  he 
remains  the  owner  of  the  thing  pledged^  which  is  in 
the  hands  of  the  creditor  only  a  deposit  securing  the 
privilege  of  the  latter."'"^ 

The  Code  of  Louisiana  contains  the  same  provision 
and  in  the  same  words. f 

Laurent,  on  this  point,  remarks  very  conclusively : 
"  If  the  law  says  that  the  pledgee  only  has  the  thing 
on  deposit,  it  is  to  show  that  he  can  not  make  use  of 
it  though  it  is  in  his  possession.  In  this  respect,  the 
right  of  the  pledgee  differs  from  the  other  real  rights 
which  are  accompanied  by  possession  :  usufruct,  servi- 
tude (easements),  emphyteusis,  superficies,  give  a 
right  in  the  thing  which  implies  the  facult)^  to  use  and 
enjo}^  it.  If  it  is  otherwise  with  the  pledgee,  it  is 
because  his  possession  has  only  one  object,  and  that 
is  to  guarantee  the  payment  of  his  debt."";;!] 

204.  Troplong  says  on  this  subject,  commenting 
upon  the  same  article  of  the  Code  Napoleon,  which 
assimilates  the  pledgee  to  a  depositary  as  to  the  pos- 
session of  the  thing:  "If  he  (the  pledgee)  possess 
the  thing,  it  is  onh'  for  a  restricted  and  limited  purpose, 

*  Code  Napoleon,  Art.  2079. 
t  Civil  Code  of  Louisiana,  Art.  3160. 
1  Laurent,  Nantissement,  Sec.  493. 
F.  Herman,  Code  Civil.  Art.  2079.  No.  n. 


Rights  and  Obligations  of  the  Pledgee.         169 

and  that  is  only  to  secure  his  right  of  preference.  His 
possession  is  precarious ;  it  only  gives  him  the  right 
to  keep,  retain  and  preserve  the  thing.  It  follows 
hence  that  he  can  not  make  use  of  it."  And  he  cites 
the  Institutes  of  Justinian:  Si  creditor  -pignore  lUa- 
tur,  furtum  comtnittit* 

But  Troplong  is  very  positive  also  that  the  pledgee 
may  subpledge  to  his  own  creditor  for  commercial 
-pur-poses  and  in  commercial  trajisactions^  as  we  will 
see  later  on. 

205.  It  is  evident  that  if  the  object  of  the  law  in 
placing  the  pledgee  in  possession  of  the  pledge  is  only 
to  secure  his  lien  and  to  protect  third  persons  against 
deception  and  fraud,  he  has  no  right  to  use  the  thing 
for  his  own  pleasure  or  benefit  without  the  consent  of 
the  pledgeor.  Such  use  is  undoubtedly  an  abuse  of 
his  right  of  possession.  It  is  violative  of  the  spirit 
and  nature  of  his  contract.  It  is  a  breach  of  trust  in 
realit}'.  Any  other  doctrine  on  this  point  is  a  depart- 
ure from  the  true  principles  of  the  law  of  pledge.  In 
reality,  if  the  pledgee  makes  use  of  the  thing  pledged 
for  his  own  advantage  he  is  combining  the  effects  of 
the  contract  of  pledge  and  those  of  the  contract  of  loan, 
and  for  this  there  is  no  warrant  of  law  whatever. 

206.  Baudry-Lacantinerie  is  equally  of  opinion  that 
the  law,  in  placing  the  pledge  in  the  hands  of  the 
debtor,  has  had  in  view,  it  is  true,  to  secure  his  right  of 
priority  and  preference ;  but  that  it  is  the  only  advan- 
tage that  he  is  entitled  to,  and  that,  in  reality,  the  law 

*  Troplong,  Nantissement,  Sees.  420,  421. 


170  The  Law  of  Pledge. 

has  intended  in  dispossessing  the  pledgeor  rather  to 
protect  third  persons  than  to  favor  the  pledgee,  and 
he  adds :  "  From  the  principle  enacted  in  Art.  2079, 
as  we  have  shown  it,  it  results  that  the  pledgee  can 
neither  make  use  of  the  thing  pledged,  nor  have  the 
enjoyment  of  it,  nor  receive  any  profit  from  it,  with- 
out the  consent  express  or  tacit  of  the  pledgeor.  * 

The  same  views  on  this  point  are  entertained  by  all 
the  commentators  of  the  French  Code  and  expound- 
ers of  the  Roman  law^  its  source  and  origin. f 

This  principle  prevails  also  generally  in  the  coun- 
tries of  continental  Europe,  which  derived  it  from  the 
Roman  law.  J 

207.  The  principle  that  the  pledgee  has  no  right  to 
use  the  pledge  for  his  own  purposes  is  so  well  estab- 
lished in  the  modern  Civil  law  that  in  the  pledge  of 
negotiable  paper,  such  as  bonds  payable  to  bearer,  he 
is  bound  to  return  to  the  pledgeor,  on  payment  of  the 
debt,  the  identical  bonds  pledged,  and  can  not,  unless 
by  agreement,  substitute  to  them  other  bonds  of  same 
quality,  value  and  kind.  And,  if  it  is  agreed  between 
pledgeor  and  pledgee  that  the  latter  shall  have  such 
right,  the  Civilians  consider  the  convention  perfectly 
valid,  but  that  it  is  no  longer  a  pledge,  inasmuch  as, 
in  the  nature  of  this  contract,  the  identical  thing 
pledged  must  be  returned  if  the  pledge  is  redeemed. 
Yet  it  seems  customary,   in  commercial  or   financial 

*  Baudry-Lacantinerie,  Xantissement,  Sec.  90. 
t  Duranton,  Nantissement,  Sec.  543. 

Font,  Nantissement,  Sec.  1165. 

Pothier,  Nantissement,  p.  250. 
X  De  St.  Joseph,  Concordance  Des  Codes  Civils,  p.  109. 


Rights  and  Obligations  of  the  Pledgee.  171 

dealings,  for  bankers  who  take  on  pledge  such  negoti- 
able paper,  to  consider  themselves  the  owners  thereof, 
in  this  sense,  that  they  have  the  right  to  dispose  of 
them  and  owe  the  pledgees  only  paper  or  bonds  of  the 
same  kind  in  return."^ 

208.  Such  contention  is  well  founded  even  in  coun- 
tries of  the  Civil  law,  if  it  is  shown  that  the  cus- 
tom of  the  locality  is  so  well  established  that  the 
pledgeor  is  presumed  to  have  acted  under  it,  and 
thereby  agreed  to  it.  A  memorable  instance  of  this 
contention  arose  in  France  in  the  case  of  the  banker 
Mires.  The  corporation  of  which  he  was  the  managing 
director  loaned  money  on  the  pledge  of  stock.  He  sold 
the  stock  at  a  time  when  it  had  arisen  in  the  market 
and  accounted  to  the  pledgees  for  the  proceeds,  pretend- 
ing that  it  had  been  sold  when  depreciated.  He  was 
prosecuted  for  breach  of  trust  and  larceny,  and  was 
sued  also  in  a  civil  action  for  damages.  His  defence 
was  mainly  that,  b}-  the  terms  of  the  pledge,  as  tacitly 
understood  between  the  parties,  he  was  only  bound 
to  return  to  the  pledgeor  stock  of  the  same  kind,  value 
and  quantity,  which  he  was  willing  to  do.  He  sup- 
ported his  defence  by  the  fact  that  the  receipt  given  to 
the  pledgeor  for  the  stock  only  designated  and  de- 
scribed the  stock  as  such^  but  did  not  give  the  numbers 
of  the  shares,  or  identify  them  individually  in  any  man- 
ner. He  contended  further  that  he  acted,  in  selling 
the  stock,  under  a  well-established  custom  of  bankers 
in  similar  circumstances.     The  Courts   held  that    the 


Laurent,  Du  Gage,  Sec.  494. 


172  The  Law  of  Pledge. 

pledgeors  could  not  be  bound  by  a  custom  of  which 
they  had  no  knowledge  ;  and  that,  even  if  the  custom 
did  exist,  as  claimed  by  Mir^s^  it  would  be  no  warrant 
or  defence  for  committing  a  fraud.  The  Criminal 
Court  of  the  first  instance  convicted  him.  He  appealed 
to  the  liigher  court,  which  confirmed  the  judgment. 
On  a  further  appeal  to  the  Court  of  Cassation  the 
judgment  was  reversed  for  want  of  form,  and  the  case 
remanded  to  the  Court  of  the  first  appeal.  The 
original  judginent  of  conviction  was  then  reversed. 
The  Minister  of  Justice,  considering  the  matter  as  of 
the  greatest  public  order  and  interest,  ordered  that 
the  case  be  carried  to  the  Court  of  Cassation.  There 
the  guilt  of  Mires  was  finallv  decreed,  and  he  was  sen- 
tenced to  fiv^e  years'  imprisonment  That  judgment 
was  the  highest  consecration  of  the  principle  of  the 
modern  Civil  law  that  the  pledgee  has  no  right  to 
make  use  of  the  pledge  without  the  consent  of  the 
pledgeor.'" 

209.  There  are  exceptions  to  this  rule,  and  there 
are  certain  cases  in  which  the  use  of  the  thing  pledged 
is  legitimate  and  implied  in  the  contract,  such  as  in 
the  pledge  of  working  cattle,  but  in  such  cases  the 
pledgee  must  account  for  the  use  or  services  of  the 
cattle  and  credit  the  pledgeor  with  the  same.  The 
like  rule  applied  to  the  pledge  of  slaves  in  the  Roman 
law.f 

The  pledge  of  a  horse  authorizes,  na}-,  compels  the 

*  Laurent.  Du  Gage.  Sec.  494. 

Journal  du  Palais,  1862,  p.  785. 
t  Troplong.  Xantissement,  See.  420  p,t  seq. 


Rights  and  Obligations  of  the  Pledgee.  173 

pledgee  to  use  him  for  the  purpose  of  exercise,  with- 
out which  he  would  suffer  and  possibly  die.  This  rule 
is  the  same  in  the  Civil  and  the  Common  law.* 

2IO.  There  is  also  an  exception  to  the  principle  that 
the  pledgee  can  not  make  use  of  the  thing  pledged, 
when  that  thins;  is  a  claim  or  chose  in  action  bearintj 
interest,  or  stock  on  which  dividends  are  declared. 
The  pledgee  is  entitled  to  the  interest  or  dividends, 
but  he  should  also  in  such  cases  credit  the  pledgeor 
with  the  amounts  thus  received  by  him.  This  rule  is 
also  common  to  the  Civil  and  Common  law.f 

2  11.  The  Code  of  Louisiana  provides  for  the  right 
of  the  pledgee  to  receive  the  fruits  of  the  pledge,  but 
he  must  account  for  them  or  deduct  them  from  his 
claims.  "The.  fruits  of  the  pledge  are  deemed  to 
make  part  of  it,  and  therefore  thev  remain,  like  the 
pledge,  in  the  hands  of  the  creditor  ;  but  he  can  not 
appropriate  them  to  his  own  use.  He  is  bound,  on 
the  contrary-,  to  give  an  account  of  them  to  the  debtor, 
or  to  deduct  them  from  what  may  be  due  to  him.'' J 

This  is  not  properly  expressed,  for  the  pledgee  does 
appropriate  the  fruits  to  his  own  use  when  he  deducts 
them  from  what  is  due  him. 

The  next  article  provides  for  that.  "  If  it  is  a  credit 
which  has    been    given    in   pledge,  and    if  this  credit 


*  Story,  on  Bailments,  Sec.  89. 

Jones,  on  Pledges,  Sees.  81.  82. 
t  Laurent,  Droit  Civil.  Vol.  28,  Sec.  490. 

Pothier,  Nantissement,  Sec.  24. 

Merlin,  Rep.,  verbo  Gage. 

Am.  and  Eng.  Ency.  of  Law.  Vol.  IS,  p.  703. 

.Fones,  on  Pledges,  Sec.  398. 
X  Civil  Code  of  Louisiana,  Art.  31 GS. 


174  The  Law  of  Pledge. 

brings  interest,  the  creditor  shall  deduct  this  interest 
from  those  which  may  be  due  him  ;  but  if  the  debt, 
for  the  securit}'  of  which  the  claim  has  been  given, 
brings  no  interest  itself,  the  deduction  shall  be  made 
on  the  principal  of  the  debt/'  ^' 

This  article  is  taken  from  the  Napoleon  Code.f 
The  previous  one  is  not ;  but  the  principle  exists  in 
the  French  law  and  is  derived  also  from  the  Roman 
law.  t  It  is  evident  that  the  fruits  of  the  thing  pledged 
can  not  belong  to  the  pledgee,  if  the}^  are  natural  fruits, 
for  the  reason  that  the  thing  is  put  in  his  hands  only 
to  secure  his  debt  and  not  to  benefit  him  in  any  other 
way.  If  the  fruits  are  the  interest  of  a  debt  or  the 
dividends  of  corporate  stock,  or  money  produced  in 
some  manner,  then  the  pledgee  receives  the  interest, 
dividends  or  money,  by  virtue  of  the  pledge,  but  on 
account  and  in  deduction  of  his  claim  against  the 
pledgeor.  § 

212.  As  to  the  capital  of  a  claim  pledged,  under  the 
rule  of  the  Civil  law,  the  pledgee  has  no  right  to 
receive  it  from  the  debtor  of  the  claim.  And  it  seems 
doubtful  whether  a  clause  in  the  act  of  pledge  stipu- 
lating such  a  right  in  favor  of  the  pledgee  would  be 
valid,  because  it  would  enable  him  to  appropriate  the 
thing  pledged  to  himself,  which  the  law  forbids.  || 
Yet,  some  of  the  commentators  of  the  French  Code 
express    the    opinion    that,    with    the    consent   of  the 

*  Civil  Code  of  Louisiana.  Art.  3169. 

t  Code  Napoleon,  Art.  8109. 

X  Pothier,  Nantissement.  fSee.  23. 

§  Baudry-Lacantinerie.  Nantissement.  Sec.  %. 

!j  Laurent,  Nantissement.  p.  494. 


Rights  and  Obligations  of  the  Pledgee.  175 

pledgeor  the  pledgee  may  receive  payment  of  the 
claims  pledged  directly  from  the  debtor  of  the  claim.* 
But,  in  France,  under  the  provisions  of  its  Code  of 
Commerce,  the  pledgee  of  a  commercial  pledge  has 
the  right  to  collect  and  recover  the  claims  or  securities 
pledged  to  him.  f 

213.  The  Common  law  and  the  jurisprudence  of 
Louisiana  are  in  accord  in  this  and  differ  from  this 
rule  of  the  Civil  law,  and  have  established  the  prin- 
ciple, that  the  pledgee  of  a  chose  in  action  can  bring 
suit  on  the  same  in  his  own  name,  and  recover  and 
receive  the  amount  in  payment  of  his  debt,  being 
bound,  of  course,  to  return  the  surplus,  if  an}-,  to  his 
pledgeor.J 

Indeed  the  law  of  Louisiana  specially  provides 
that  if  the  credit  which  has  been  given  in  pledge 
becomes  due  before  it  is  redeemed  by  the  person 
pawning  it,  the  creditor,  by  virtue  of  the  transfer 
which  has  been  made  to  him,  shall  be  justitied  in 
receiving  the  amount  and  in  taking  measures  to  re- 
cover it.  When  the  amount  is  received  he  must  apply 
it  to  the  payment  of  the  debt  due  to  himself,  and  restore 
the  surplus,  should  there  be  am-,  to  the  person  from 
whom  he  held  it  in  pledge.      "  If  the  credit  which  has 


*  Baudry-Lacantinerie,  Xantissement,  Sec.  98. 

Duranton,  Nantissement,  Sec.  538. 

Pont,  Nantissement,  Sec.  1180. 
t  Baudry-Lacantinerie,  Nantissement,  Sec.  155. 

Code  de  Commerce,  Art.  91. 
X  Succession  of  Dolhonde,  21  La.  An.  5. 

Diicasse  vs.  McKenna,  28  La.  An.  419. 

Ciaaffe  &  Sons  vs.  DuBose,  3G  La.  257. 

Story,  Bailments,  Sec.  321. 


176  The  Law  of  Pledge. 

been  given  in  pledge  becomes  due  before  it  is  redeemed 
by  the  person  pawning  it,  the  creditor,  by  virtue 
of  the  transfer  which  has  been  made  to  him,  shall 
be  justified  in  receiving  the  amount,  and  in  taking 
measures  to  recover  it.  When  received,  he  must 
apply  it  to  the  payment  of  the  debt  due  to  himself, 
and  restore  the  surplus^  should  there  be  any,  to  the 
person  from  whom  he  held  it  in  pledge.'-* 

214.  But  we  must  make  a  distinction  in  the  Civil 
law  between  the  general  use  of  the  pledge  and  that 
particular  use  of  it  which  consists  in  subpledging  or 
rcpledging  it  by  the  pledgee.  And  we  must  also 
distinguish  between  the  act  of  the  pledgee  subpledg- 
ing or  repledging  the  thing  and  the  act  b}'  which 
he  transfers  his  claims  and  rights  as  pledgee  to  a 
third  person.  As  to  the  right  to  subpledge  or  re- 
pledge,  there  seems  to  be  a  diversity  of  opinion  among 
the  Civilians,  and  some  writers  express  the  opinion 
that  the  pledgee  has  such  right.  And  as  to  his  right 
to  transfer  his  claim  against  the  pledgeor  together 
with  the  pledge  attached  to  it,  the  Civilians  are  gen- 
erally of  the  opinion  that  it  may  be  done  without  vio- 
lating the  contract  of  pledge.  But  these  points  will 
form  the  subject  of  the  following  chapter. 


*  Civil  Code  of  Louisiana,  Art.  3170. 


CHAPTER  XV. 

SUBPI.EDGE    OR    RePI.KDGE    BY    PlkDGEE. 

215.  Has  the  pledgee  the  right  to  subpledge  or 
repledge  to  secure  his  own  obHgation,the  thing  pledged 
to  him  by  his  debtor?  From  the  principle  of  the  Civil 
law  that  he  has  no  right  to  use  the  pledge,  it  follows 
that  he  has  no  right  to  pledge  his  pledge,  or  make  a  sub- 
pledge  of  it,  because  that  is  clearly  making  use  of  the 
thing  pledged.  It  is  what  Laurent  afRrms.  "  From 
the  principle  that  the  pledgee  has  the  thing  pledged 
only  on  deposit,  it  follows  that  he  can  not  subpledge 
it."-" 

Baudry-Lacantinerie  says  the  same  thing.  "  From 
the  principle  that  the  pledgee  is  not  the  owner  of  the 
thing   pledged,    it  results   that   he    can  not  subpledge 

it."t 

216.  Pont,  on  the  contrary,  remarks:  "  But  the 
pledgee  is  not  forbidden,  as  we  have  explained  it,  to  sub- 
pledge  the  thing."  J  But  when  we  come  to  the  explan- 
ation he  alludes  to,  we  find  that  he  does  not  show  that 
the^pledgee  is  not  forbidden  to  subpledge.  He  sim- 
ply explains  that,  if  the  subpledgee  is  in  good  faith 
and  in  ignorance  of  the  fact  that  the  pledgee  is  not 
the  owner  of  the  thing,  but  simply  the  pledgee  of   it, 


*  Laurent,  Xantissement,  Sec.  49G. 

t  Baudiy-Lacantinerie,  Nantissement,  Sec.  05. 

See  I'othier,  Nantissement,  Sec.  27. 
%  Pont,  Nantissement,  Sec.  11G5,  p.  649. 


178  The    IjAW  of  Pledge. 

such  subpledgee  is  protected  by  the  rule  of  the  French 
law  that  the  possessor  of  movable  property  is  presumed 
to  be  the  owner  and  can  convey  the  \\\XQ:\.0  2.hona  fide 
purchaser  or  pledgee.  Pont  says  further  that  the  sub  - 
pledgeor  in  that  case  would  be  estopped  from  den^-ing 
that  the  thing  is  his  property,  after  holding  out  to  the 
subpledgee  that  it  was. 

217.  Troplong  occupies  the  same  position  on  this 
question,  not  pretending  that  the  pledgee,  as  a  matter 
of  right,  is  permitted  to  subpledge,  but  that  the  sub- 
pledgee,  if  in  good  faith  and  in  ignorance  of  the  real 
title  of  the  subpledgeor,  will  be  protected  and  the  sub- 
pledge  maintained  by  virtue  of  the  same  rule  of  the 
French  law,  that  for  movable  property  possession  is 
equivalent  to  title.  Troplong,  also  like  Pont,  after 
saying  that  the  pledgee  can  not  sell  or  abuse  the 
pledge,  asserts  that  "  he  ma}',  however,  pledge  it.'' 
His  reasoning,  like  that  of  Pont,  shows  rather  that 
the  pledgee  has  no  right  to  subpledge,  but  that  lie  can 
do  it,  as  a  matter  of  fact.* 

Wheii  he  comes  to  the  illustration  of  the  rule  in 
commercial  affairs,  Troplong  is  ver^^  positive  about 
the  faculty  of  the  pledgee  to  subpledge.  Wo  will 
give  his  own  words : 

"  Sometimes  the  pledgee,  consignee  of  the  mer- 
chandise, subconsigns  it  in  consideration  of  advances 
made  to  him.  For  instance,  a  commission  merchant 
who  has  no  money  to  inake  the  advances  which  his 
correspondent  demands  of  b.im  on  the  goods  whicii  he 

*  Troplong,  Xantisseinent,  Sees.  82,  S3,  422,  423. 


SUBPLEDGE  OR  KePLEDGE  BY  PLEDGEE.        179 

ships  to  him,  borrows  from  a  third  person  the  funds 
which  he  needs.  Can  he  assign  to  the  latter  his  privi- 
lege by  putting  the  bill  of  lading  in  his  hands?  Has 
the  assignee  a  privilege  on  the  goods  thus  subcon- 
signed  to  him?  The  affirmative  seems  to  me  unde- 
niable, as  well  as  to  Delamare  and  Lepoitevin  ;  and 
if  reference  is  made  to  the  decision  of  the  Court  of 
Cassation  of  23d  April,  1816,  which  I  have  cited 
above,  it  will  be  seen  that  this  mode  of  action  is  cus- 
tomary in  commerce. 

"It  extends  credit;  it  facilitates  negotiations;  it 
puts  in  motion  capital  and  the  shipping  of  merchan- 
dise."* 

It  is  difficult  to  reconcile  these  views  with  the 
opinion  of  Laurent  and  that  of  Baudry-Lacantinerie, 
quoted  above. 

218.  Judge  Story  thinks  that  the  Civil  law  gives 
the  right  to  the  pledgee  to  subpledge  and  to  transfer 
the  pledge.  But  we  must  bear  in  mind  that  when 
he  speaks  of  the  Civil  law  he  means  the  Roman  law. 
Of  the  modern  Civil  law  as  enacted  in  the  Code  Napo- 
leon, he  does  not  seem  to  be  well  informed.  His  fre- 
quent confusion  of  the  Civil  law  of  modern  times  with 
the  institutions  of  the  old  Roman  law  is  apt  to  lead 
his  readers  into  error.  In  the  instance  of  the  rigfht 
of  the  pledgee  to  subpledge  and  transfer  the  pledge, 
he  cites  Domat  and  the  Codex.  But  Domat  was  im- 
bued with  the  Roman  law  and  preceded  the  Napo- 
leon Code  and  its  great  commentators   by  nearl}^  two 

*  Troplong,  Nantissement,  Sec.  2.51. 


180  The  Law  of  Pledge. 

centuries.  The  Roman  law  did  allow  the  pledgee  to 
subpledge  to  his  own  creditor.  But  we  must  note  the 
distinction  which  it  made  between  the  subpledge  and 
the  use  of  the  pledge  by  the  pledgee.  The  latter,  as 
we  have  seen,  was  prohibited."^  Troplong  professes 
the  same  doctrine,  as  he  contends  that  the  pledgee  may 
subpledge,  but  can  not  use  the  pledge. f 

219.  We  will  see  that  the  reasoning  of  the  Com- 
mon law  writer  leads  to  the  same  conclusion,  and 
the  pledgee  may  subpledge  though  he  has  not  the 
right  to  do  so.  The  sum  total  of  it  is,  that  the 
common  assent,  based  upon  the  wants  of  the  com- 
mercial world,  is  stronger  than  an  abstract  principle 
of  law  ;  and  that  a  few  civilians  and  most,  if  not  all, 
the  jurisconsults  of  the  Common  law  countries,  have 
departed  from  the  true  nature  of  the  contract  of  pledge 
and  admitted,  if  not  consecrated,  the  popular  rule  of 
the  subpledge  by  the  pledgee. 

220.  If  in  certain  commercial  or  financial  transac- 
tions, it  is  established  by  usage  or  custom  that  a  bank 
or  other  moneyed  institution  has  the  right  to  sub- 
pledge  the  collateral  securities  in  its  hands,  it  is  because 
the  pledgeor  knows,  or  is  presumed  to  know  such 
custom,  acts  under  the  established  rule  and,  therefore, 
tacitly  consents  that  his  pledgee  should  make  such  use 
of  the  pledge,  and  subpledge  it,  or  transfer  his  pledge, 
at  his  own   risk  and  peril.      But,  as  this  is  only  done 


'  Troplong,  Nantissement,  Sec.  82. 

Digest,  Lex  1.  C,  Si  pignus  pignori. 

Ante,  Sees.  204. 
t  Ante,  Sec.  210. 


SUBPLED(4K  OR  KePLEDGP:  BY  PLEDGEE.        181 

by  the  implied  consent  of  the  pledgeor,  it  only  con-  I 
firms  the  rule  that,  without  his  consent,  the  pledgee  \ 
can  not  subpledge.'"' 

22  1.  Either  in  the  use  of  the  pledge,  or  in  the  sub- 
pledge,  it  will  not  do  to  say  that,  if  the  pledge  is  not 
damaged  or  injured  by  use,  there  is  no  objection  in 
the  pledgee  using  it.  The  same  mis^ht  be  said  of  the 
thing  deposited,  and  yet  it  is  not  doubtful  that  the 
depositary  has  no  right  to  use  the  thing  deposited. 

222.  As  a  distinct  question  from  the  right  to  sub- 
pledge,  has  the  pledgee  the  right  to  transfer  his  claim 
against  the  pledgeor  together  with  the  pledge  attached 
thereto?  To  this  Baudry-Lacantinerie  sees  no  objec- 
tion and  thinks  such  transfer  may  be  made,  provided 
that  the  formalities  necessary  for  the  pledge  itself 
should  be  obtained.  But  then,  he  says,  the  security 
will  only  be  relative,  because  the  original  owner  of 
the  thing  pledged,  the  original  pledgeor,  has  only 
to  pay  his  debt  to  compel  the  restitution  of  the 
pledge,  f 

In  reality,  there  is  no  difference  as  to  the  right  of 
the  pledgee  to  subpledge  and  his  right  to  transfer  the 
pledge  with  the  claim  that  it  secures.  In  both  cases 
the  pledgee  is  making  use  of  the  pledge.  If  it  is  done 
without  the  consent  of  the  pledgeor,  it  is  clearly  ille-  ^ 
gal.  If  done  with  the  consent  of  the  pledgeor,  there 
can  be  no  question.  That  consent  inay  be  express  or 
it  may  be  simply  taeit ;    and  it  may  be  implied  either 


*  Laurent,  Xantissement,  Sec.  494. 

t  Baudiy-Lacantinerio,  Xantissement,  Sec.  95. 


182  The  Law  of  Pledge. 

from  the  nature  of  the  thing  pledged  or  from  the  cus- 
tom of  the  place  where  the  contract  is  formed. 

2  2T,.  According  to  the  strict  rule  of  the  Civilians, 
any  use  of  the  pledge,  if  unauthorized  expressly  or 
tacitly  by  the  pledgeor,  is  an  abuse  of  the  pledgee's 
possession,  and  entitles  the  pledgeor  to  the  restitution 
of  the  thing  pledged.  * 


Code  Napoleon,  Art.  2082. 
Laurent,  Kanlissement,  Sec.  40S. 
].ocre,  Vol.  VllI,  p.   ]0G. 
Pont,  Nantissenient,  Sec.  IISO. 
Baudry-Lacantinerie,  Xantissenient,  Sec.  141, 


CHAPTER  XVI. 
The  Right  of  the  Pledgee  to  Use  the  Pledge 

AND  TO   SuBPLEDGE  OR  RePLEDGE   UNDER  THE 

Common  Law. 

224.  Although  the  source  and  the  nature  of  the  con- 
tract of  pledge  are  the  same  under  the  Civil  and  the 
Common  law,  and  in  both  systems  the  thing  pledged 
is  deposited  with  the  pledgee  only  to  secure  the  debt 
of  the  pledgeor  ;  yet  the  two  laws  have  diverged  widely 
from  each  other  in  their  understanding  of  the  rights  of 
the  pledgee  over  the  thing  pledged.  We  have  seen 
that  under  the  Civil  law  the  pledgee  has  no  right  to 
use  the  pledge  without  the  consent  of  the  pledgeor, 
express  or  tacit,  and  that  such  consent  will  not  be 
easily  presumed  by  the  courts,  on  the  principle  that 
nobody  is  presumed  to  give  away  a  right.* 

225.  The  rule  is  the  other  way  at  Common  law, 
and  it  is  there  pretty  well  established  that  the  pledgee 
can  use  the  pledge  for  his  own  advantage,  can  sub- 
pledge  or  repledge  it  to  secure  his  own  debt,  and  can 
transfer  the  pledge  together  with  the  claim  which  it 
secures.  This  seems  to  be  decidedly  the  rule  both 
in  England  and  in  the  United  States.  And  the  Com- 
mon law  authorities  put  the  principle  upon  the  ground 
of  the  right  of  the  pledgee  so  to  do,  as  a  consequence 
of  the   pledge,    without  sa^nng  whether   the  right   is 


*  Ante,  Sec.  215 
183 


184  .        The  Law  of  Pledge. 

based  upon  the  presumed  consent  of  the  pledgeor.  It 
is  evidently  a  departure  from  the  nature  and  the  ori- 
ginal object  of  the  pledge.  It  is  in  contradiction  to 
the  various  definitions  of  the  pledge,  which  all  amount 
to  this  :  that  a  pledge  is  a  bailment,  or  a  trust,  or  a 
deposit,  of  personal  property,  as  sectirity  of  the 
■pledgeor'' s  debf.'^ 

The  law-writers  may  not  agree  on  the  right  of  the 
pledgee  to  use  the  pledge.  Judge  Story  qualifies  that 
right  by  stating  the  exceptional  cases  in  which  it  can 
be  exercised.  It  would  follow  that,  out  of  those  ex- 
ceptional cases,  the  right  does  not  exist.  And  he 
says:  "But;  if  the  use  will  be  without  any  injury, 
and  yet  the  pawn  will  thereby  be  exposed  to  extraor- 
dinary perils,  there  the  use  is  impliedly  interdicted. ""f 

Let  us  observe  the  contrast  with  the  Civil  law. 
There,  the  use  may  be  impliedly  ^erw/Z/etfy  otherwise 
it  is  interdicted  naturall}'. 

Mr.  Jones'  statement  of  the  rule  is  also  a  negative 
pregnant  with  an  affirmative.  His  opinion  is^  that  a 
pledgee  has  no  right  to  use  the  pledged  chattel  if  his 
use  of  it  will  wear  or  injure  it,  so  as  to  lessen  its  value. 
This  is  declaring  indirectly  that  the  pledgee  may 
ordinarily  use  the  pledge  for  his  own  advantage. [j; 
Mr.  Schouler  states  that  the  only  rational  doc- 
trine as  to  use  of  the  pledge  appears  to  be  this : 
that    the     profits     of    the     bailment    belong    to    the 


*  Jones,  on  Pledges.  Sec.  1 . 

Story,  on  Bailments,  Sees.  329,  330. 
t  Story,  on  Bailments.  Sec.  330. 
\  Jones,  on  Pledges,  Sec.  394. 


Right  of  Pledgee  to  Subpledge  or  Repledge.      185 

pledgeor,  while  the  expenses  swell  his  indebted- 
ness to  the  pledgee  on  their  mutual  reckoning ;  that 
the  pledgee  has  no  right  to  a  personal  use^  without 
permission,  beyond  what  is  incidental  to  the  exercise 
of  ordinary  care  in  preserving  the  thing;  but  that  this 
incidental  use  and  the  charge  of  keeping  may,  in 
trifling  instances,  be  taken  as  intended  for  a  mutual 
offset.* 

These  views  of  Mr.  Schouler  show  a  more  faithful 
adherence  to  the  true  doctrine  of  the  law  of  pledge, 
and  a  nearer  approach  to  the  Civil  law. 

226.  Chancellor  Kent  adopts  the  early  doctrine  laid 
down  by  Lord  Holt,  for  which  he  expresses  great 
admiration,  and  thinks  that  the  pledgee  may  use  the 
pledge,  if  it  is  not  injured  by  the  use.f 

The  very  reasoning  of  Lord  Holt  thus  praised  by 
Chancellor  Kent,  is  condemned  by  Judge  Story,  t 

The  doctrine  supported  by  Lord  Holt  is  that:  "  If 
the  pawn  be  such  as  will  be  worse  for  using,  the 
pawnee  can  not  use  it,  as  clothes,  etc.  But,  if  it  be 
such  as  it  will  never  be  worse,  as,  if  jewels  for  the 
purpose  were  pawned  to  a  lady,  she  might  use  them. 
But  then  she  must  do  it  at  her  otun -peril.  For,  where- 
as, if  she  keeps  them  locked  up  in  her  cabinet,  if  her 
cabinet  is  broken  open  and  the  jewels  taken  from 
thence,  she  would  be  excused.  If  she  wears  them 
abroad  and  is  there   robbed,  she   will  be  answerable. 


*  Schouler,  on  Bailments,  p.  198. 
t  Kent's  Comin.,  '2  Vol.,  Sec.  578. 
;;  Story,  on  Bailments,  Sec.  329. 


186  The  Law  of  Pledge. 

And  the  reason  is,  because  the  pawn  is  in  the  nature 
of  a  deposit,  and^  as  such,  is  not  liable  to  l)e  used.^ 

To  this  Judge  Story  says  :  "  Now,  the  reason  here 
g-iven,  so  far  from  proving  that  the  pledgee  may  law- 
fully use  the  jewels,  expressly  negatives  any  such 
right."  f 

Sir  William  Jones  and  Justice  Buller  both  affirm 
the  doctrine  that  the  pledgee,  even  if  there  is  peril  in 
the  use  of  the  thing  pledged,  may  lawfully  use  it,  but  at 
his  01071  peril.  Judge  Stor}'  thinks  that  it  may  well 
be  doubted  whether  there  is  an}-  foundation  for  that 
doctrine.  ;|^ 

227.  The  theory  of  the  English  judges  is  clearly- 
fallacious  and  pervertible  of  the  true  principles  of  the 
law  of  pledge.  The  question  is  not  what  the  pledgee 
or  depositary  may  do  even  at  his  -peril,  under  certain 
circumstances,  but  what  he  has  the  rigid  to  do  under 
the  terms  of  the  contract,  which  is  the  law  of  his  case. 
It  is  curious  to  observe  that  those  English  judges  should 
have  enunciated  as  a  principle  of  law  what  is  in  reality 
the  exclusion  of  such  principle.  Why  should  it  be  at 
his  peril  that  the  pledgee  may  use  the  thing  pledged.^ 
Because  he  has  no  right  to  do  so,  holding  it  only  as  a 
depositary.  And  he  has  still  less  than  the  depositary 
the  right  to  use  the  pledge,  because  the  contract  of 
deposit  is  formed  for  the  benefit  of  the  depositor,  not 
of  the    depositary,  whilst    the    contract   of    pledge  is 


*  Coggs  vs.  Bernard,  2  Ld.  Ray,  909,  916. 
t  Story,  on  Bailments,  See.  330. 
j/d.,  ibid. 


Right  of  Pledgee  to  Subpledge  or  Repledge.      187 

formed,  so  far  as  the    security    is   concerned,  for  the 
benefit  of  the  pledgee. 

The  doctrine  advocated  by  the  EngHsh  judges  ap- 
phed  to  the  pledge  of  jewelry  used  by  the  pledgee, 
and  it  could  not  be  pretended  that  the  nature  of  the 
thing  pledged  warranted  the  use  of  it.  Nor  was  there 
any  contention  that  the  pledgeor  had  consented  that 
it  shiould  be  used  by  the  pledgee.  The  decisions  were, 
therefore,  the  direct  and  clear  announceinent  that,  by 
the  nature  of  the  contract  of  pledge,  the  pledgee  has 
the  right  to  use  the  pledge. 

228.  But  Judge  Story  himself,  who  disagreed  with 
them,  does  not  seem  to  have  been  imbued  with  the 
true  principle  of  the  law  of  pledge  on  that  point,  for 
he  said :  ' '  But,  if  the  pledgee  should  undertake  to 
pledge  the  property  (not  being  negotiable  securities) 
for  a  debt  beyond  hiz  orvn,  or  to  make  a  transfer 
thereof  to  his  own  creditor,  as  if  he  was  absolute 
owner ;  it  is  clear  that  In  such  a  case  he  would  be 
guilt}'  of  a  breach  of  trust,  and  his  creditor  would 
acquire  no  title  beyond  that  held  by  the  pawnee."* 

This  is  an  acknowledgment  of  the  rig-ht  of  the 
pledgee  to  use  the  pledge,  by  subpledging,  to  the 
extent  of  his  claim.  And  why  make  the  distinction 
as  to  negotiable  securities,  when  the  question  is  one 
of  right  or  abuse  of  right,  not  of  power  to  abuse  the 
right,  with  or  without  peril.?  The  subpledgee  of 
negotiable  securities,  if  a  holder  in  good  faith,  will  be 
clearly  protected  against  the  true  owner,  as  holders  in 

*  story,  on  Bailments.  Sec.  324. 


188  The  Law  of  Pledge. 

good  faith  of  negotiable  paper  always  arc,  whatever 
the  source  from  which  they  hold.  But  the  pledgee 
has  no  more  right  (if  he  has  the  power)  to  use  the 
negotiable  securities  than  any  other  property  pledged, 
and  he  is  fully  as  guilty  of  the  breach  of  trust  when 
he  uses  the  negotiable  securities  without  the  consent 
of  the  pledgeor  as  when  he  uses  any  other  property 
pledged  to  him. 

The  dominant  idea  in  the  Common  law  on  that 
subject  has  been  and  is  still,  not  what  the  pledgee  has 
the  right  to  do,  but  what  the  pledgeor  can  or  can  not 
do,  when  the  thing  pledged  is  used  without  his  per- 
mission or  consent,  to  recover  it  from  the  subpledgee. 

229.  The  preponderance  of  authority  in  the  United 
States  is  clearly  that  the  pledgee  may  subpledge  or 
repledge  the  thing  he  holds  in  pledge,  to  secure  his 
own  debt,  which  is  a  corollary  of  the  rule  that  he  may 
make  use  of  it. 

The  cases  in  which  it  has  been  so  decided  do  not 
seem  to  discriminate  between  the  right  of  the  pledgee 
to  use  the  pledge,  or  to  subpledge,  and  his  -power  to 
do  so,  having  in  his  hands  the  disposition  of  the  thing 
pledged.  On  principle  it  is  clearly  against  the  nature 
and  principles  of  the  contract  of  pledge,  and  the 
pledgee  can  only   subpledge  at  his  own  peril.  * 

The  pledgee  may  not  have  the  right  to  subpledge, 
and    yet  the    pledgeor    may    not  have  the  power    to 


Talty  vs.  Savings  and  Trust  Company,  3  Otto,  321. 

Jarvis'  Adm.,  vs.  Rodders,  15  Mass.  369. 

Lewis  vs.  Mott,  36  X.  Y.  39.5. 

Donald  vs.  JSuckling,  Law  Rep..  1  (J.  B.  .')8.'>. 


Right  of  Pledgee  to  Subpledge  or  Repledge.      189 

attack  the   subpledge,  so  that  the   rights  of  the  sub- 
pledgee  may  be  good  against  him. 

230.  In  the  pledge  of  negotiable  paper,  the  law 
merchant  is  paramount,  as  it  is  in  the  purchase  or 
discount  of  such  paper,  and  this  is  as  much  so  in  the 
countries  of  Civil  law  as  in  those  of  Common  law. 
The  pledgee  who  has  taken  negotiable  paper  before 
maturity,  in  the  usual  course  of  business,  that  is,  with- 
out notice  of  an  adverse  right,  and  for  a  valuable  con- 
sideration, can  hold  it  against  ihe  true  owner.  But 
this  rule  will  form  the  subject  of  a  separate  chapter. 


CHAPTER  XVII 
Tortious  Pledge  of  Another  Person's  Property. 

231.  As  to  the  pledge  of  personal  property,  other 
than  negotiable  paper,  by  any  other  person  than  the 
true  owner,  and  without  the  latter's  consent^  the  law 
is  the  same  in  the  United  States,  including  the  State 
of  Louisiana,  in  England  and  in  some  countries 
of  Europe.  Under  the  principle  that  nobody  can 
transfer  a  right  that  he  does  not  himself  possess,  the 
fraudulent  or  unauthorized  pledge  does  not  affect  the 
true  owner.  He  can  recover  his  property  against  the 
pledgee,  even  when  the  latter  is  in  good  faith,  is 
without  notice  of  the  adverse  right,  and  has  given  full 
value  for  the  pledge.* 

232.  But  in  France,  and  in  Belgium,  Holland  and 
Italy,  which  have  followed  the  French  law  in  that 
respect,  the  rule  is  that,  for  personal  or  movable  prop- 
erty, possession  is  equivalent  to  title.  "  En  fait  de 
meubles^  possessiojz  vaut  titre,-''  says  the  Napoleon 
Code.  The  maxim  of  the  Roman  law  on  this  point  is 
Mobilia  non  liahent  seqitellaiii.  Consequentl}^,  in 
France,  Belgium,  Holland  and  Italy  the  pledgee  or 
purchaser  in  good  faith  of  personal    property  fraudu- 

♦lentlv    disposed  of  has   a  valid   title   against  the  true 


»  Stern  Bros.  vs.  Bank,  34  La.  An.  1119. 
Bird  vs.  Cockrem,  28  La.  An.  70. 
Henderson  vs.  Case,  31  La.  An.  215. 
.Tones,  on  Pledges,  Sees.  54,  55,  56. 
Benjamin,  on  Sales,  Sec.  (5  et  seq. 
Tiedman,  on  Sales,  Sec.  310  et  seq. 

191 


192  The  Law  of  Pledge. 

owner.  The  French  did  not  take  this  rule  concerning 
personal  property  from  the  Romans,  with  whom  it 
was  not  well  established,  but  from  the  Germanic  cus- 
toms of  the  Franks,  who  invaded  the  Gauls.*  Curi- 
ous enough,  the  modern  Germans  have  not  adopted 
or  retained  the  principle,  and  it  does  not  exist  in 
Prussia,  except  in  the  sale  or  pledge  made  by  a 
merchant  in  the  course  of  his  business, f  as  we  will 
see  hereafter.  In  this  as  in  other  matters,  the  Gauls 
abandoned  the  Roman   law,  whilst  Germany  retained 

it4 

233.  In  Louisiana  the  framers  of  the  Civil  Code 
refused  to  follow  the  French  law  on  this  subject,  by 
suppressing  the  maxim  En  fait  de  meiibhs  -posses- 
sion vaut  titre  from  Art.  2279  of  the  Code  Napoleon, 
in  adopting  the  remainder  of  the  article.  The  juris- 
prudence of  that  State  has  firmly  established  the  rule 
that  the  true  owner  can  recover  his  property  fraudu- 
lently pledged  to  a  pledgee  in  good  faith.  § 

234.  Thus,  a  citizen  of  the  United  States,  having 
personal  property  in  the  hands  of  an  agent  in  France, 
would  have  no  recourse  against  the  pledgee  of  the 
same  in  good  faith,  if  it  were  fraudulently  pledged 
by  the  agent  for  his  own  account.  And  a  citizen  of 
France  having  personal  property  in  this  countr}',  in 
the    hands    of  an    a^ent,    could    recover  it    from  the 


*  Troplong.  Prescription,  Vol.  2,  Sec.  1040  et  seq. 

t  De  St.  Josepli.  Concordance  de  tons  les  Codes,  p.  1'2A  et  seq. 

X  Montesquieu,  Esprit  des  Lois,  Vol.  3,  p.  6(3. 

§  Louisiana  Code,  Art.  3506. 

Code  Napoleon,  Art.  2279. 

Stern  Bros.  vs.  Bank,  34  La.  An.  1119. 


Tortious  Pledge  of  Another  Person's  Property.   193 

pledgee  in  good  faith  of  the  agent,  who  would  have 
fraudulently  pledged  it  for  his  own  account.  I  speak, 
of  course,  of  personal  property  in  this  case,  other  than 
negotiable  paper. 

235.  Let  us  see  now  the  reasons  given  in  support 
of  the  different  systems  by  their  respective  promoters. 

Troplong  sa3's  :  "  In  such  cases  the  true  owner  has 
only  himself  to  blame  for  having  misplaced  his  confi- 
dence. He  has  no  right  of  action  against  the  third 
person  in  good  faith  who  has  acquired  the  movable 
property.  Otherwise  there  would  be  no  safety  in 
business." 

And  again  :  "  But  if  the  thing  pledged  has  been 
subpledged  b}^  the  creditor,  it  is  established  that  the 
subpledgee  has  all  the  rights  of  a  pledgee.  The  doc- 
trine is  founded  on  the  wise  and  protecting  principle 
of  the  French  law  :    movables  .have  no  following.'^''  ^ 

236.  Laurent  expresses  a  similar  opinion:  "It  is 
true  to  say  that  movables  pass  rapidly  from  hand  to 
hand.  The  possessor  of  a  movable  effect  sells  it;  in 
a  few  weeks  it  may  be  transferred  to  ten  different 
purchasers.  If  the  true  owner  could  claim  it  against 
the  last  purchaser,  ten  lawsuits  would  follow.  Public 
order  requires  that  this  should  be  avoided.  It  is  a 
necessity  of  commerce."  f 

237.  It  is  proper  to  note  that  such  is  clearly  the 
law  in  France  only  since  the  promulgation  of  the 
Code  Napoleon. 

*  Troplong,  Nantissement,  p.  74  and  p.  392. 
t  Laurent,  Droit  Civil,  Vol.  32,  p.  553. 


194  The  Law  of  Pledge. 

It  is  also  well  to  observe  that  the  rule  only  applies 
to  corporeal  movables,  and  to  choses  in  action  trans- 
ferable by  delivery ;  and,  further,  that  in  case  such 
property  was  lost  or  stolen,  the  true  owner  can  claim 
it  from  the  vendee  or  pledgee  in  good  faith  during 
three  years  from  the  time  of  the  loss  or  theft.* 

The  Common  Law^  View  of  the  Subject. 

238.  Mr.  Jones,  in  his  excellent  work  on  the  Law 
of  Pledges,  says:  "Mere  possession  of  a  chattel, 
though  indicative  of  title,  is  not  title  ;  and  one  taking 
a  pledge  of  it  is  bound  to  satisfy  himself  that  the 
pledgeor  is  the  owner ;  and  if  he  relies  solely  upon 
the  pledgeor's  possession,  he  takes  the  risk  of  having 
to  surrender  the  property  to  the  true  owner.  *  ''^  ^ 
If  one  holding  goods  for  safekeeping  pledges  them 
with  intent  to  convert  the  proceeds  to  his  own  use, 
he,  in  effect,  commits  a  larceny,  and  the  pledgee  ac- 
quires no  title  as  against  the  owner,  although  he  deals 
with  the  pledgeor  in  good  faith. "f 

239.  Mr.  J.  P.  Benjamin,  in  his  book  on  the  sale 
of   personal  property,  says : 

"  In  general  no  man  can  sell  goods  and  convey  a 
valid  title  to  them  unless  he  be  the  owner.  Nemo  dat 
quod  lion  habet.  A  person,  therefore,  however  inno- 
cent, who  buys  goods  from  one  not  the  owner,  obtains 
no  property  in  them  whatever  (except  in  some  special 


*  Code  Napoleon,  Art.  2279. 

Baudry-Lacantinerie.  Xantissement.  Sees.  30,  31. 
t  Jones,  on  Pledges,  Sec  54. 


ToRTioi'S  Pledge  of  Another  Person's  Property.    195 

cases  presently  to  be  noticed) ;  and  even  if  in  ignorance 
of  the  fact  that  the  goods  were  lost  or  stolen,  he  resell 
them  to  a  third  person  in  good  faith,  he  remains 
liable  in  trover  to  the  original  owner,  who  may  main- 
tain his  action  without  prosecuting  the  felon."* 


Benjamin,  on  Sales,  etc.,  Sec.  6. 
Agnew  vs.  Johnson,  22  Pa.  St.  471. 
Gottlieb  vs.  Hartman,  3  Colo.  53. 
Vermilye  vs.  Adams,  21  Wall.  143. 
Texas  vs   White,  7  Wall.  700. 


CHAPTER  XVIII. 

Right  of  Pledgeor  to  Demand  the  Rescission 
OF  THE  Contract  and  Restitution  of  the 
Pledge  if  Pledgee  Makes  Use  of  the  Thing 
Pledged  Without  His  Consent. 

240.  The  contract  of  the  pledge  contains,  like  all 
contracts  in  the  Civil  law,  the  implied,  if  not  expressed, 
understanding,  and  resolutory  condition,  that  the  vio- 
lation of  the  agreement  by  one  of  the  parties  entitles 
the  other  party  to  the  rescission  of  the  contract.  It 
follows  hence  that,  if  the  pledgee^  without  the 
pledgeor' s  consent,  makes  use  of  the  pledge  for  his 
own  pleasure  or  benefit,  whether  the  thing  pledged  is 
thereby  damaged  or  not,  the  pledgeor,  under  the 
Civil  law,  has  the  right  to  annul  the  contract  and 
demand  the  return  of  the  pledge,  because  the  use 
made  of  it  by  the  pledgee  is  a  violation  of  the  agree- 
ment. The  unauthorized  use  is  an  abuse,  even  if  no 
damage  follows.  Laurent  is  emphatic  in  his  opinion 
on  that  point.  The  Napoleon  Code  provides  that 
"The  debtor  can  not^  tiuless  the  creditor  abuses 
the  pledge^  demand  the  restitution  of  it  before  he  has 
entirely  paid,  principal  and  interest,  the  debt  for 
which  the  pledge  has  been  given. ''^ 

241.  Commenting  upon  this  article^  Laurent  says: 
''  Art.  2082  consecrates  a  consequence  of  that  princi- 


*Code  Napoleon,  Art.  2282. 
197 


198  The  Law  of  Pledge. 

pie  (that  the  pledgee  has  no  right  of  use).  In  gen- 
eral, the  debtor  can  not  command  the  restitution  of 
the  pledge  before  he  has  paid  the  debt.  There  is  an 
exception,  says  Art.  2082,  when  the  pledgee  abuses 
the  thing  pledged.  AVhat  is  understood  here  by  abuse? 
^  *  *  The  sole  fact  to  use  the  thing  is  an  abuse, 
inasmuch  as  the  creditor  does  what  he  has  no  right  to 
do."* 

\nd  again,  the  same  writer  says:  "That  has 
nothing  in  common  with  the  undue  use  which  the 
pledgee  makes  of  the  thing.  If  he  used  it  with  all  the 
care  of  a  good  administrator,  he  would  not  the  less 
be  guilty  of  abuse,  for  it  is  abusing  to  do  what  one 
has  no  right  to  do."  f 

242.  Other  commentators  of  the  Napoleon  Code  do 
not  take  this  extreme  view  of  its  Art.  2082.  Pont, 
at  the  same  time  that  he  recognizes  in  the  article  the 
consecration  of  the  principle  of  the  resolutory  condi- 
tion in  contracts,  says  as  to  the  abuse  of  the  pledge 
by  the  pledgee  :  ' '  ThuS;  the  law  does  not  anticipate 
only  the  case  in  which  the  creditor  would  make  an 
excessive  use  of  the  thing ;  it  extends  to  all  cases 
where  he  would  imperil  the  thing,  and  to  all  cases  in 
which  he  would  make  of  it  a  use  contrary  to  the  law, 
to  honesty  and  to  good  morals.  In  other  words  the 
abuse  of  the  thing  in  any  manner  whatever  affects  the 
resolutory  condition  and  takes  away  from  the  creditor 
the  benefit  of  the  right  of  retention.'*'  \ 

*  Laurent,  Nantissement,  p.  492. 

t  Id..  Ibid. 

X  Pont.  Nantissement,  Sees.  1189,  1190. 


Right  of  Pledgeor  to  Demand  Rescission.        199 

This  language  implies  evidently  that,  in  the  opinion 
of  the  writer,  a  moderate  and  uninjurious  use  of  the 
thing  pledged  does  not  give  to  the  pledgeor,  under  the 
terms  of  the  article,  the  right  to  demand  the  restitu- 
tion of  the  pledge. 

243.  But  Baudry-Lacantinerie,  the  most  recent  of 
tlie  French  commentators,  seems  to  side  with  Laurent, 
for  he  says,  on  this  article:  ''By  this  expression /c> 
abuse  we  must  understand  at  the  same  time  the 
case  when  the  creditor  makes  use  of  the  pledge 
without  being  authorized,  and  that  when  he  exceeds 
the  limits  of  his  authority  and  makes  an  abusive  use 
of  the  thing."* 

244.  The  right  of  the  pledgeor  to  demand  the 
return  of  the  pledge  in  case  the  pledgee  makes  an 
illegal  use  of  it,  is  in  the  nature  itself  of  the  contract, 
as  it  is  in  the  nature  of  the  contract  of  lease  or  hire, 
that  the  lessor  has  the  right  to  demand  the  surrender 
of  the  leased  premises  if  the  lessee  makes  an  improper 
or  unwarranted  use  of  them.  It  is  found  in  the  French 
law  preceding  the  Code  Napoleon  as  well  as  in  that 
Code,  and  it  is  found  in  the  Roman  law,  from  which 
the  modern  Civil  law  has  received  it. 

Pothier  stated  both  the  law  of  France  of  his  time 
and  the  Roman  law  from  which  it  came.  "  There  is 
a  case  to  which  the  -pignoratitia  action  is  opened  and 
may  be  brought  for  the  restitution  of  the  thing  given 
in  pledge,  though  the  creditor  is  not  yet  paid  or  satis- 
fied :   it    is   that    in  which   he  would  abuse  the   thing 

*  Baudry-Lacantinerie,  Du  Gage,  p.  G9. 


200  The  Law  of  Pledge. 

pledged.  Ulpian  gives  us  this  example  of  it:  Si  pros- 
tituit  a7icillam^  vel  aliud  improhatum  facere  coegit^ 
illius  pignus  ancillcB  solvitur.  L.  2^^  Sec.  j,  ^.  d. 
tit.''''  Under  the  Roman  law  a  slave  could  be  given 
in  pledge,  and,  if  a  woman,  the  prostitution  of  her 
was  an  abuse  of  the  pledge. 

It  is  evident  that  under  the  general  principles  of  the 
law  of  contracts,  even  in  default  of  special  statutory 
provisions^  the  abuse  of  the  pledge  by  the  pledgee 
entitles  the  pledgeor  to  the  restitution  of  the  thing 
pledged.  The  nature  and  extent  of  the  abuse  is  a  mat- 
ter for  the  appreciation  of  the  court  or  jury,  according 
to  the  more  or  less  stringent  rules  of  the  Civil  law, 
which  governs  the  contract  of  pledge. 

245.  Mr.  Pont  states,  in  connection  with  the  right 
of  the  pledgeor  to  demand  the  restitution  of  the  thing 
pledged  if  the  pledgee  abuses  it,  that  the  article  of  the 
French  Code  is  only  the  special  application  of  that 
general  principle  which  extends  to  all  onerous  con- 
tracts, that  the  resolutory  condition  is  always  under- 
stood in  the  synallagmatic  contracts  whenever  one  of 
the  parties  does  not  fulfil  his  engagement.'^ 

246.  The  Civil  Code  of  Louisiana,  like  the  Napo- 
leon Code,  provides  for  the  resolutory  condition  in 
these  terms:  ''A  resolutory  condition  is  implied  in 
all  commutative  contracts,  to  take  effect  in  case 
either  of  the  parties  do  not  comply  with  his  engage- 
ments ;  in  this  case,  the  contract  is  not  dissolved  of 
right ;  the  party  complaining  of  a  breach   of  the  con- 

*  Pont,  Nantissement,  Sec.  1189. 


Right  op  Pledgeor  to  Demand  Rescission.       201 

tract  may  either  sue  for  its  dissolution  with  damages^ 
or,  if  the  circumstances  of  the  case  permit,  demand  a 
specific  performance."* 

247 .  The  same  principle  forms  part  of  the  Common 
law.  Although  the  Civilians  have  perhaps  expounded 
the  law  of  contracts  more  elaborately  and  more  scien- 
tifically than  the  English  and  American  jurists  have 
done  it,  yet  the  same  rules  of  reason  and  justice 
govern  both  systems.  A  breach  of  the  contract,  or 
the  failure  to  perform  his  engagement  by  one  of  the 
contracting  parties  entitles  the  other  party  to  the 
rescission  of  the  contract  under  the  Common  law  as 
well  as  under  the  Civil  law.  This  right  if  not  ex- 
pressed in  the  agreement  is  implied  in  the  under- 
standing of  the  parties,  and  the  principle  may  be 
invoked  by  the  complaining  party.  The  resolutory 
condition  of  the  Civilians  is  nothing  else.  It  is,  under 
different  terms,  the  breach  or  failure  of  the  condition 
precedent  in  the  Common  law.f 

248.  Such  being  the  case,  how  should  we  under- 
stand the  words  of  Chief  Justice  Cockburn  in  the 
case  of  Donald  vs.  Suckling,  in  which  the  question 
was,  whether  the  transfer  of  the  pledge  by  the  pledgee 
without  the  pledgeor' s  consent^  entitled  the  latter  to 
the  rescission  of  the  contract,  and,  consequently,  to 
the  restitution  of  the  thing  pledged.  The  Chief  Jus- 
tice said :    "  I  think  it  unnecessary  to  the  decision  in 

*  Civil  Code  of  Louisiana,  Art.  2046. 

Code  Napoleon,  Art.  1184. 
t  Chitty,  on  Contracts,  4th  Am.  Edition,  p.  572. 

Parsons,  on  Contracts,  6th  Edition,  Sees.  677,  678. 

Wharton,  on  Contracts,  Sec.  919. 


202  The  Law  of  Pledge. 

the  present  case  to  determine  whether  a  party,  with 
Avhom  an  article  has  been  pledged  as  a  security  for 
the  payment  of  money,  has  a  right  to  transfer  his 
interest  in  the  thing  pledged  (subject  to  the  right  of 
redemption  in  the  pawnor)  to  a  third  party.  I  should 
<:ertainly  hesitate  to  lay  down  the  affirmative  of  that 
proposition.  Such  a  right  in  the  pawnee  seems  quite 
inconsistent  with  the  undoubted  right  of  the  pledgeor 
to  have  the  thing  pledged  returned  to  him  imme- 
diatel}'  on  the  tender  of  the  amount  for  which  the 
pledge  was  given.  In  some  instances  it  may  well  be 
inferred  from  the  nature  of  the  thing  pledged^,  as  in  the 
case  of  a  valuable  work  of  art,  that  the  pawnor,  though 
perfectly  willing  that  the  article  should  be  intrusted 
to  the  custody  of  the  pawnee,  would  not  have  parted 
with  it  on  the  terms  that  it  should  be  passed  on  to 
others  and  committed  to  the  custody  of  strangers. 
It  is  not,  however,  necessary  to  decide  this  question 
in  the  present  case. 

"The  question  here  is,  whether  the  transfer  of  the 
pledge  is  not  only  a  breach  of  the  contract  on  the 
part  of  the  pawnee,  but  operates  to  put  an  end  to  the 
contract  altogether,  so  as  to  entitle  the  pawnor  to  have 
back  the  thing  pledged  without  payment  of  the  debt. 
I  am  of  opinion  that  the  transfer  of  the  pledge  does 
not  put  an  end  to  the  contract,  but  amounts  only  to  a 
breach  of  contract,  upon  which  the  owner  may  bring 
an  action, — for  nominal  damages  if  he  has  sustained 
no  substantial  damages ;  for  substantial,  if  the  thing 
pledged  is  damaged  in  the  hands  of  the  third  party, 


Right  of  Pledgeor  to  Demand  Rescission.        203 

or  the  owner  is  prejudiced  by  dela}-  in  not  having  the 
thing  deHvered  to  him  on  tendering  the  amount  for 
which  it  was  pledged.  We  are  not  deahng  with  a 
case  of  Hen^  which  is  merely  the  right  to  retain  pos- 
session of  the  chattel,  and  which  right  is  immediately 
lost  on  the  possession  being  parted  with,  unless  to  a 
person  who  may  be  considered  as  the  agent  of  the  party 
having  the  lien,  for  the  purpose  of  its  custody.  In 
the  contract  of  pledge,  the  pawnor  invests  the  pawnee 
with  much  more  than  the  mere  right  of  possession. 
He  invests  him  with  a  rio^ht  to  deal  with  the  things 
pledged  as  his  own,  if  the  debt  be  not  paid  and  the 
thing  redeemed  at  the  appointed  time.  It  seems  to 
me  that  the  contract  continues  in  force,  and  with  it  the 
special  property  created  by  it,  until  the  thing  pledged 
is  redeemed  or  sold  at  the  time  specified.  The 
pawnor  can  not  treat  the  contract  as  at  an  end  until 
he  has  done  that  which  alone  enables  him  to  divest 
the  pawnee  of  the  inchoate  right  of  property  in  the 
thing  pledged,  which  the  contract  has  conferred  on 
him."* 

249.  With  all  the  respect  due  the  high  authority  of 
the  English  judge,  we  can  not  tamely  submit  to  his 
doctrine.  It  is  a  denial  of  the  risfht  of  oblisfations.  It 
is  a  departure  from  the  sanctity  of  engagements.  Had 
it  been  said  in  the  opinion  that,  by  the  established 
jurisprudence  of  the  Common  law,  the  pledgee  had 
the  right  to  use  the  pledge,  to   subpledge   or  repledge 


*  Donald  vs.  Suckling,  L.  R.  1  Q.  B..  p.  617, 
Jones,  on  Pledges,  Sec.  420. 


204  The  Law  of  Pledge. 

it,  and  to  transfer  it  to  another  party,  criticism  would 
have  been  out  of  place.  But,  to  hold  that  the  pledgee 
has  violated  the  contract  by  the  transfer  and  that  the 
pledgeor  has  yet  no  right  to  demand  the  rescission, 
and,  as  a  legal  consequence  thereof,  to  claim  the  res- 
titution of  the  pledge,  is  subversive  of  the  fundamental 
principles  of  the  law  of  contract.  Those  principles 
govern  alike  all  contracts,  the  contract  of  pledge  as 
well  as  the  contract  of  hire.  Would  it  be  said,  if  a 
person  liires  my  horse  with  the  understanding  that 
he  shall  only  ride  him  two  hours  a  day,  and  he  rides 
him  eight  hours  a  day,  there  being  thereby  a  breach 
of  the  agreement,  I  can  not  demand  the  rescission  of 
the  contract  and  the  return  of  the  horse ;  and  that  I 
am  relegated  to  a  suit  for  damages?  Or  that,  if  I 
grant  a  lease  of  a  house  as  a  residence  for  a  family, 
the  lessee  may  turn  it  into  a  brothel ;  and  that  I  have 
no  right  to  rescind  the  lease  ;  but  must  be  satisfied 
with  a  demand  for  damages.  The  very  doctrine  of 
the  right  of  rescission  on  account  of  the  breach  of  con- 
tract repels  such  a  theory. 

250.  The  views  of  Justice  Mellor  in  the  same  case, 
on  the  right  of  the  pledgee  to  use  the  pledge,  are  also 
remarkable.  After  holding  that  the  pledgeor  is  not 
entitled  to  the  restitution  of  the  thing  pledged  on 
account  of  the  unauthorized  transfer  made  by  the 
pledgee,  and  that  he  can  recover  in  an  action  for  any 
special  damage  which  he  may  have  sustained  b}"  rea- 
son of  the  act  of  the  pawnee  in  repledging  the  goods, 
the   English  judge  says:   "And  I  think  that  such  is 


Right  of  Pledgeor  to  Demand  Rescission.       205 

the  true  effect  of  Lord  Holt's  definition  of  a  '  vadium 
or  pawn,'  in  Coggs  vs.  Bernard ;  although  he  was  oi 
opinion  that  the  pawnee  could  in  no  case  use  the 
pledge  if  it  would  thereby  be  damaged,  and  must  use 
due  diligence  in  the  keeping  of  it,  and  says  that  the 
creditor  is  bound  to  restore  the  pledge  upon  payment 
of  the  debt,  because,  by  detaining  it  after  the  tender 
of  the  money,  he  is  a  wrongdoer,  his  special  property 
being  determined  ;  yet  he  nowhere  says  that  the  mis- 
use or  abuse  of  the  pledge  before  payment  or  tender 
annihilates  the  contract  upon  which  the  deposit  took 
place."  * 

251.  Are  we  to  understand  from  this  that  the  Eng- 
lish law  of  pledge  is,  and  has  been  from  the  time  of 
Lord  Holt,  that  the  pledgee  may  not  only  use,  but  also 
misuse  or  abiisz  the  pledge,  before  payment,  without 
the  pledgeor  having  the  right  to  demand  the  rescis- 
sion of  the  contract ;  and  that  his  only  remedy  is  a 
claim  for  damages? 

252.  Justice  Blackburn,  in  the  same  case  of  Donald 
vs.  Suckling,  lays  his  opinion  upon  the  principle  that 
the  contract  of  pledge,  creating  an  interest  in  the 
pledge,  which  may  be  assigned,  the  subpledging  is 
not  in  general  so  inconsistent  with  the  contract  as  to 
amount  to  a  renunciation  of  that  contract. "f 

253.  Justice  Shee,  in  the  same  case,  dissented,  and 
denying  the  right  to  transfer  the  pledge,  or  to  sub- 
pledge,  said  very   pointedly : 

*  Donald  vs.  Suckling,  L-  R.  Q.  B.,  p.  610. 

t  Donald  vs.  Suckling,  1  L.  R.  Q.  B..  pp.  010  el  seq. 


206  The  Law  op  Pledge. 

"  If  the  pawnee  ma}^  repledge  the  pawn  the  sub- 
pledgee  may  do  the  same,  and  so  on  ad  infijiitum.  To 
whom  then  is  the  original  pawnor  to  apply?  The  rela- 
tion between  the  pawnor  and  the  pawnee  is  of  a  fidu- 
ciary and  personal  character,  and  until  the  time  for 
redeeming  the  pledge  has  elapsed  the  pawnee  is  bound 
to  keep  the  pawn.''* 

254.  We  may  conclude  from  the  English  and 
American  authorities  that  the  common  jurisprudence 
has  established  the  rule  that  the  pledgee  ma}'  use 
(not  abuse),  repledge  or  subpledge,  and  transfer  the 
pledge,  without  the  consent,  express  or  implied,  of 
the  pledgeor.  And  it  is  curious  to  observe  that  the 
fundamental  principle  of  the  Civil  law  on  this  subject, 
that  the  thing  pledged  being  put  in  the  hands  of  the 
pledgee  only  as  a  deposit  and  for  the  sole  purpose  of 
securing  his  debt,  he  can  not  draw  any  other  advan- 
tage or  benefit  from  his  possession  ;  it  is  curious  to 
observe,  we  say,  that  this  principle,  which  is  of  the 
nature  of  the  contract  of  pledge,  does  not  seem  to 
have  been  of  any  weight  or  consideration  with  the 
courts  of  the  Common  law.f 


*  Donald  vs.  Suckling.  1  L.  R.  Q.  B..  p.  589. 
t  Coggs  vs.  Bernard,  2  Ld.  Ray,  909  ft  seq. 

Halliday  vs.  Holgate,  Exchequer,  Vol.  3,  297. 

Donald  vs.  Suckling.  L.  R.  1  Q.  B.  5S.5. 

.lohnson  vs.  Stear,  15  C.  B.  X.  S.  330. 

Ogden  vs.  Lathrop.  (55  N.  Y.  185. 

Lawrence  vs.  Maxwell,  53  N.  Y.  19. 

Whitaker  vs.  Sumner,  20  Pick.  (Mass.)  399. 

Cooper  vs.  Bay,  47  111.  53. 


CHAPTER  XIX. 

Right  of  Other  Creditors  of  the  Pledgeor  to 
Seize  the  Pledge. 

255.  The  thing  pledo;ed  is  put  in  the  possession  of  the 
pledgee  to  secure  his  claims  and  to  create  his  privilege 
or  lien  against  other  creditors  of  the  pledgeor.  By 
the  terms  of  the  contract  of  pledge  and  by  the  law, 
the  pledgee  has  the  ris^ht  to  retain  this  possession 
until  his  debt  is  paid.  But,  here  again,  we  find  a 
great  difference  between  the  Civil  law  and  the  Com- 
mon law. 

In  the  Civil  law,  this  right  of  retention  only  exists 
between  the  pledgee  and  the  pledgeor.  It  does  not 
bind  other  creditors  of  the  latter  to  the  extent  that 
they  can  not  demand  that  the  thing  pledged,  if  it  is 
of  a  value  more  than  sufficient  to  pay  the  pledgee, 
should  not  be  surrendered  by  him  and  be  judicially 
sold,  subject  to  his  right  of  preference  over  the  pro- 
ceeds. 

Troplong  states  the  French  law  on  this  point  in 
these  words :  "  But,  shall  this  right  of  retention  of 
the  pledgee  be  applicable  to  third  persons  in  good 
faith,  who  have  executory  rights  and  have  an  interest 
in  the  sale  of  the  thing  pledged?  Can  thepledg.ee 
oppose  his  right  of  retention  to  them  and  send  them 
off  to  be  paid  as  they  can  ?  Not  at  all ! 

"  From  the  principle  that  the  right  of  retention  can 
be  opposed  only  to  the  pledgeor  and  not  to  third  per- 

207 


208  The  Law  of  Pledge. 

sons,  it  follows  that  though  the  pledgee  is  in  posses- 
sion of  the  pledge,  the  other  creditors  with  executory 
rights  can  seize  the  thing  pledged  in  his  hands,  cause 
it  to  be  sold  agfainst  his  will  and  convert  it  into 
money,  reserving  his  right  of  preference  over  the  pro- 
ceeds."* 

256.  Laurent  expresses  the  same  opinion  on  the 
right  of  the  other  creditors  of  the  pledgeor  to  cause 
the  pledge  to  be  seized  and  sold,  subject  to  the  lien  of 
the  pledgee. 

And  he  explains  it  as  follows :  Can  the  pledgee 
oppose  his  right  to  retain  the  pledge  until  payment  to 
the  other  creditors?  Clearl}-  not.  The  right  of  re- 
tention is  foreign  to  the  creditors,  because  there  is  no 
conflict  between  them  and  the  pledgee  until  the  latter 
claims  his  privilege  and  asks  to  be  paid  by  preference 
over  the  other  creditors  of  the  common  debtor.  Now, 
the  right  of  retention  is  distinct  and  different  from  the 
privilege ;  therefore  the  pledgee  can  not  avail  him- 
self of  it  against  the  other  creditors ;  and  these  may 
exercise  their  rights  resfardless  of  the  rio;ht  of  reten- 
tion.  Which  is  the  right  of  the  creditors?  They 
may  seize  the  property-  of  their  debtor ;  they  may, 
therefore,  seize  also  the  thing  which  he  has  pledged 
because  he  remains  the  owner  of  it.  This  right  of 
seizure,  and  the  forced  sale  which  is  the  consequence 
of  it,  can  not  be  impeded  by  the  right  of  retention  of 
the  pledgee  ;  all  that  this  one  can  demand  when  there 
is  a  conflict  between  him  and  other  creditors,  is  to  be 

*  Troplong,  Xantissement,  Sees.  458.  459. 


Right  of  Other  Creditors  to  Seize  Pledge.      209 

paid  by  preference ;  but  the  privilege  does  not  pre- 
vent the  creditors  from  seizing  the  pledge,  because  the 
seizure  does  not  impair  the  rights  of  the  pledgee. 
When  the  thing  is  sold,  a  concourse  takes  place  in 
Court  between  the  creditors  for  the  distribution  of  the 
price,  and  the  pledgee  is  paid  first  and  in  full,  as  it  is 
over  the  price  of  the  pledge  that  he  exercises  his  right 
of  preference.  This  right,  then,  far  from  being 
ignored,  is  realized.  It  is  the  same  thing  of  all 
privilege  or  mortgage  creditors.  The  real  rights 
which  are  attached  to  the  property  affected  by  the 
privilege  or  the  mortgage  do  not  prevent  ordinary 
creditors  from  acting ;  they  can  proceed  to  the  expro- 
priation of  the  common  debtor;  but  when  it  will  come 
to  the  distribution  of  the  proceeds,  then  a  concourse 
will  be  opened  and  the  mortgage  and  privilege  credi- 
tors will  be  paid  by  preference  over  the  rest.* 

257.  Pont  expresses  the  same  views  on  this  sub- 
ject. The  contract  of  pledge,  from  which  the  reten- 
tion arises,  is  personal  to  the  pledgeor  and  the 
pledgee.  The  other  creditors  are  not  parties  to  it. 
They  can  not  be  bound  by  it  further  than  b}'  the 
privilege  the  law  gives  the  pledgee.  No  person  can 
put  his  property  beyond  the  reach  of  his  creditors  by 
encumbering  it  with  any  right  or  cause  of  preference 
in  favor  of  any  particular  creditor.  The  right  of 
preference,  if  legal,  should  be  respected,  but  that  is  all 
that  the  preferred  creditor  can  demand.  The  prop- 
ert}"  itself  is  answerable  for  all  the  debts  of  the  owner, 
and  is  subject  to  the  action  of  all  his  creditors. 

*  Laurent,  Nantissement,  Sec.  r)02. 


210  The  Law  op  Pledge. 

But  this  right  of  the  other  creditors  can  only  be 
exercised  when,  from  the  circumstances  of  the  case, 
the  nature  of  the  thing  pledged,  its  value  and  the 
amount  of  the  debt  secured,  the  seizure  and  sale  de- 
manded by  the  creditors  could  not  in  any  manner 
impair  or  destroy  the  rights  of  the  pledgee.  If,  for 
instance,  the  value  of  the  pledge  is  manifestly  less  than 
the  debt,  or  if  the  very  offer  of  the  pledge  at  the  public 
sale  would  diminish  its  value  beyond  the  amount  of 
the  debt;  in  fact,  under  any  circumstances,  which 
would  impair  or  affect  the  pledge  to  the  prejudice  of 
the  pledgee,  the  other  creditors  would  not  be  entitled 
to  the  seizure  and  sale.  ^ 

258.  In  the  jurisprudence  of  Louisiana  this  princi- 
ple has  become  axiomatic,  and  has  been  firmly  estab- 
lished b}^  an   unbroken   line  of  decisions. f 

This  jurisprudence  is  based  upon  the  principle,  as 
shown  b}'  the  commentators  of  the  Code  Napoleon, 
that  the  contract  between  pledgeor  and  pledgee  se- 
cures the  right  of  retention  only  against  the  pledgeor, 
but  not  against  his  other  creditors  ;  and  that  the  debtor 
has  no  power  to  take  his  property  out  of  the  reach  of 
all  his  creditors,  which  is,  in  a  broader  sense,  //lei'r 
common  pledge.     All  that  the  pledgee  can  demand  is 


*  Pont,  Nantissement,  Sec.  1186. 

Baudry-Lacantinerie,  Nantissement,  See.  248. 
t  Kirkpatrick  &  Co.  vs.  Oldham,  38  La.  An.  553. 

Hornor  vs.  Sheriff,  34  La.  An.  389. 

Ange  vs.  Variol,  31  La.  An.  865. 

White  vs.  Blanchard,  19  La.  An.  02. 

James  vs.  Breaux,  26  La.  An.  265. 

Marot  vs.  Husband,  18  La.  An.  665. 

Wallis  vs.  Boove,  14  La.  An.  104. 

Fisher  vs.  Gordey,  11  La.  An.  275. 


Right  of  Other  Creditors  to  Seize  Pledge.      211 

that  his  lien,  or  privilege,  or  right  of  preference  over 
the  proceeds  of  the  pledge,  should  be  and  remain 
unimpaired ;  and  that  is  done  when  the  full  amount 
of  his  claim  is  satisfied  from  the  seizure  and  sale  of 
the  thing  pledged.  It  follows  from  this  rule  that  no 
adjudication  can  be  made  at  the  judicial  sale  of  the 
pledge  if  the  amount  bid  does  not  cover  the  debt  of 
the  pledgee  and  the  costs  of  the  proceedings.  This 
is  clearly  doing  justice  to  all,  to  the  pledgee  as  well  as 
to  the  other  creditors.  The  law  is  therefore  wiser  and 
better  than  the  contrary  rule  of  the  right  of  absolute 
retention  in  the  pledgee. 

In  one  of  the  cases  cited  above,  the  Court  of  Louis- 
iana says:  "It  is  now  well  settled  in  our  jurispru- 
dence that  the  propert}-  of  any  nature  held  in  pledge 
by  a  creditor  ma}"  be  seized  from  his  possession  bv 
another  creditor  of  the  common  debtor  and  sold  sub- 
ject to  the  pledgee's  claims.  The  only  right  w^hich 
the  law  secures  to  the  pledgee  is  to  satisfy  his  debt 
'  by  privilege  and  in  preference  to  other  creditors  of 
his  debtor  out  of  the  product  of  the  movable,  corpo- 
real or  incorporeal,  which  has  been  thus  burdened.' 
Nothing  in  the  nature  of  the  contract  can  authorize 
the  pledgee  to  hold  indefinitely  the  property  pledged, 
which  is  usually  far  in  excess  of  the  amount  thereby 
secured,  and  to  thus  deprive  other  creditors  of  their 
recourse  on  the  debtor's  property."  " 


*  Hornor  vs.  Sheriff  et  als.,  34  La.  An.  889. 


212  The  Law  of  Pledge. 

At  Common    Law  Other    Creditors    Can    Not 
Seize  the  Pledge. 

259.  By  the  Common  law,  the  thing  pledged  is 
beyond  the  reach  of  other  creditors  of  the  pledgeor. 
The  right  of  retention  of  the  pledgee  is  absolute,  as 
well  against  third  persons  as  against  the  pledgeor. 
The  pledgeor  having,  by  the  contract,  only  the  right 
to  redeem,  his  creditors  are  bound  b}'  the  terms  of  the 
pledge.  They  can  neither  seize  nor  attach  the  thing 
pledged,  nor  garnishee  the  pledgee.  They  are  bound 
and  made  to  suffer  by  an  agreement  between  pledgeor 
and  pledgee,  to  which  they  were  no  parties,  and  by 
which  the  property  of  their  debtor,  their  comfnofi 
pledge,  may  be  forever  taken  away  from  them,  though 
there  might  be  left  a  surplus  to  pay  them,  after  seizure 
and  sale  of  the  pledge  and  satisfaction  of  the  pledgee's 
claim.* 

How  far  superior  and  more  equitable  is  the  rule  of 
the  Civil  law  in  this  respect,  which,  at  the  same  time, 
maintains  the  rights  of  the  pledgee  intact  and  unim- 
paired and  protects  those  of  third  persons  ! 

The  proof  of  that  superiority  lies  in  the  fact  that  in 
several  States  of  the  Union  statutes  have  been  passed 
on  that  subject  granting  to  the  creditors  of  the  pledgeor 
the  right  to  seize  or  attach  the  pledge,  subject  to  the 
lien  of  the  pledgee,  departing,  in  that  respect,  from 
the  Common  law,  and  adopting  the  principle  of  the 
Civil  law.  f 


*  Jones,  on  Pledges,  Sec.  372. 

t  Jones,  on  Pledges,  Sees.  372  et  seq. 


Right  of  Other  Creditors  to  Seize  Pledge.      213 

Pledgee  is  not  bound  to  Surrender  the  Pledge 
TO  Assignee  or  Syndic  of  Pledgeor. 

260.  It  is  a  condition  precedent  of  the  right  of  the 
other  creditors  to  cause  the  pledge  to  be  seized  and 
sold,  that  a  showing  be  made  by  them  of  the  surplus 
value  of  it  over  the  debt  of  the  pledgee. 

The  rule  is  not  changed  by  the  assignment  in  bank- 
ruptcy, or  surrender  of  his  property  by  the  pledgeor 
subsequently  to  the  pledge.  His  assignee,  or  the 
syndic  of  the  creditors,  has  no  right  to  take  the  pledge 
out  of  the  hands  of  the  pledgee  and  include  it  in  the 
assets  of  the  insolvent  for  the  purpose  of  winding  up 
the  concern.  * 

This  was  declared  by  the  Supreme  Court  of  the 
United  States  to  be  the  Common  law  as  well  as  the 
law  of  Louisiana,  f 

The  pledgee  has,  even  after  the  assignment  or  sur- 
render of  his  property  by  the  pledgeor,  the  right  to 
foreclose  the  pledge  under  the  terms  of  his  contract. 
All  that  the  assignee  or  syndic  of  the  creditors  can  do 
is  to  act  against  him  in  court  and  demand  that  he 
should  foreclose  his  pledge  and  turn  over  the  surplus 
of  the  proceeds  to  the  representative  of  the  creditors. 

The  principle  that  the  pledgee's  right  of  retention 
is  not  impaired  by  the  pledgeor's  assignment  in  bank- 
ruptcy is  expressed  by  the  Supreme  Court  of  the  United 


*  Renshaw  vs.  Creditors,  40  La.  An.  37. 

t  Yeatman  vs.  Savings  Institution,  95  U.  S.  766. 

Jerome  vs.  McCarter,  94  U.  S.  734. 

Donaldson  vs.  Farwell,  93  U.  S.  631. 


214  The  Law  of  Pledge. 

Stales  in  the  following  words  :  "  The  assignee  takes 
the  title  subject  to  all  equities,  liens  or  incumbrances, 
whether  created  by  operation  of  law  or  by  act  of  the 
bankrupt.  He  takes  the  property  in  the  same  '  plight 
and  condition '  that  the  bankrupt  held  it.  The  assignee 
takes  only  the  bankrupt's  interest  in  the  property. 
He  has  no  right  or  title  to  the  interest  which  other 
parties  have  therein,  nor  any  control  over  the  same 
further  than  is  expressly  given  to  him  by  the  Bank- 
rupt Act,  as  auxiliary  to  the  preservation  of  the  bank- 
rupt estate  for  the  benefit  of  his  creditors.  It  would 
be  absurd  to  contend  that  the  assignee  in  bankruptcy 
became  ipso  facto  seized  and  possessed  in  entirety,  as 
trustee,  of  every  article  of  property  in  which  the  bank- 
rupt has  any  interest  or  share.''  * 

261.  In  a  case  arising  under  the  State  Insolvency 
laws  of  Louisiana,  in  which  the  syndic  of  creditors 
demanded  the  surrender  of  the  pledge  as  part  of  the 
assets  of  the  insolvent,  the  Court  said  :  "  This  right 
of  retention  is  an  essential  constituent  of  the 
jus  ■pignoris.  It  has  been  held  that  this  right  is 
not  operative,  as  against  creditors  of  the  pledgeor,  to 
prevent  them  from  seizing  and  selling  the  pledged 
property  so  as  to  liquidate  the  debt  and  secure  any 
possible  surplus.  No  doubt  the  syndic  of  an  insolvent 
pledgeor  might,  on  proper  showing  and  by  proper 
proceeding,  force  a  similar  liquidation,  so  as  to  secure 
any  possible  residuum  for  the  creditors,  as  was  done 
by  the  decree  of  the  Court  in  the  case  of  Brother  vs. 

*  Yeatman  vs.  Savings  Institution,  95  U.  S.  766. 


Right  of  Other  Creditors  to  Seize  Pledge.      215 

Saul,  II  An.  225.  But  it  is  entirely  inconsistent  with 
the  pledgee's  right  of  retention,  and  has  never  been 
held  in  this  State  that,  by  mere  virtue  of  the  cession, 
the  S3'ndic  acquires  the  right  to  demand  the  surrender 
of  pledged  property  to  be  officially  administered  by 
him  and  subjected  to  the  costs  and  burdens  of  such 
adininistration."* 

262.  From  the  principle  that  the  assignee  in  bank- 
ruptc}',  or  syndic  in  insolvency,  succeeds  to  the  rights 
of  the  debtor,  such  as  they  were  before  his  surrender 
or  cession,  and  subject  to  all  the  equities  which 
existed  against  him,  it  follows  that,  generally  where 
the  pledgeor  could  not  have  attacked  the  legality  of 
the  pledge  for  mere  want  of  forms  or  formalities,  or 
on  account  of  irregularities,  the  assignee  or  syndic  is 
equally  without  right  or  authorit)^  to  do  so.  This  is 
the  doctrine  of  the  Civil  law,  as  established  by  the 
Court  of  Louisiana.  For  instance,  the  requirement 
of  a  written  act  of  pledge  is  not  indispensable  so  far  as 
the  parties  themselves  to  the  contract  are  concerned. 
The  pledge  is  valid  without  such  written  act  quoad 
the  pledgeor,  who  is  estopped  from  pleading  its  nullity 
on  that  ground. t 

Hence  it  was  held  that  the  pledgeor's  syndic  can 
not  set  up  that  ground  of  invalidity  either,  against  the 
pledgee.  ;|; 


*  Renshaw  vs.  His  Creditors,  40  La.  An.  41. 
t  Matthews  vs.  Rutherford,  7  La.  An.  225. 
X  Brother  vs.  Saul,  11  La.  An.  225. 

Portee  vs.  Corning,  9  La.  An.  539. 

Campbell  vs.  Slidell,  5  La.  An.  274. 


216  The  Law  of  Pledge. 

263.  The  rule  obtains  equally  in  the  Common  law, 
and  the  authorities  are  numerous  and  imposing,  which 
declare  that  an  assignment  in  bankruptcy,  like  an}- 
other  assignment  by  operation  of  law,  passes  the 
rights  of  the  bankrupt  precisely  in  the  same  plight  and 
condition  as  he  possessed  them,  subject  to  all  equities  ; 
that  the  assignee,  in  such  cases,  stands  in  the  place 
of  the  bankrupt ;  that  the  rights  of  the  latter  are  the 
rights  of  the  former;  and  hence,  that  the  mortgages  or 
the  pledges,  or  other  contracts  of  the  bankrupt  which 
he  could  not  have  attacked,  the  assignee  can  not 
attack,  provided  that,  in  all  such  contracts  or  acts  of 
the  bankrupt,  there  was  no  fraud  or  dishonesty.* 

264.  But  the  doctrine,  under  either  system  of  law, 
is  not  without  its  difficulties.  Justice  Bradley  in  the 
often  cited  case  of  Casey  vs.  Cavaroc,  shows  those 
difficulties  and  indicates  clearly  how  the  rale  should 
be  appHed.  He  says:  "Whilst  it  is  generally  true 
that  an  assignee  for  the  benefit  of  creditors  holds  the 
property  assigned  subject  to  the  same  equities  as  the 
debtor  or  assignor  held  it,  it  is  not  universally  true. 
Many  transactions  would  be  binding  on  the  latter 
which  would  not  be  binding  on  the  assignee.  All 
sales  and  securities  made  for  the  actual  purpose  of 
defrauding  creditors  are  of  this  class.  By  the  law  of 
Louisiana,  a   pledge,  in  order  to  be   effective  against 


*  Cook  vs.  Tiillis.  IS  Wall.  332. 
Gibson  vs.  Warden.  14  Wall,  244. 
Casey  vs.  Credit  Mobilier,  2  Woods,  77. 
Mitford  vs.  Mitford,  9  Ves.  Jr.  87. 
Mitchell  vs.  Winslow,  2  Story,  630. 
Jones,  on  Pledges,  See.  585. 


Right  of  Other  Creditors  to  Seize  Pledge       217 

third  persons,  must  be  accompanied  by  a  privilege. 
It  may  be  valid  as  a  contract  between  the  parties 
without  this  quahty,  as  held  both  in  the  French  law 
(as  already  shown),  and  in  Louisiana,  in  the  case  of 
Matthews  vs.  Rutherford,  7  La.  An.  225.  But  Art. 
3162  expressly  declares  that  the  privilege  arising  from 
a  pledge  does  not  subsist  except  when  the  thing 
pledged  has  been  actually  put  and  remained  in  the 
possession  of  the  creditor,  or  of  a  third  person 
agreed  on  by  the  parties.  Without  the  privilege, 
or  right  of  preference,  the  Credit  Mobilier  has 
no  claim  to  hold  the  securities  in  question  as 
against  the  other  creditors.  How,  then,  can  it 
set  up  such  a  claim  against  the  receiver?  The 
receiver  does  not  represent  the  bank  alone  ;  he  repre- 
sents all  the  parties.  He  represents  the  law,  which 
takes  charge  of  the  property  for  the  benefit  of  all  cred- 
itors according  to  their  respective  and  mutual  rights. 
Suppose  no  receiver  had  been  appointed,  and,  when 
the  bank  failed,  it  had  called  the  creditors  together  and 
laid  all  its  assets  on  a  table,  could  the  Credit  Mobilier 
in  presence  of  the  other  creditors  have  laid  its 
hands  on  the  securities  in  question  and  claimed  them 
by  right  of  any  privilege  or  preference,^  It  certainly 
could  not  have  done  so  if  it  had  no  privilege  as  against 
them.  And  yet  this  is  precisely  the  relation  in  which 
the  parties  stood.  The  existence  of  a  receiver,  as 
trustee  for  all,  did  not  change  it.  That  one  essential 
thing  which  the  law  requires  for  the  subsistence  of 
the  privilege,  namely,  possession,  was  wanting.    Other 


218  The  Law  of  Pledge. 

formalities  might  have  been  dispensed  with.  But,  pos- 
session is  essential — made  so  by  the  express  terms  of 
the  law.  Nearly  all  the  cases  in  France,  where  this 
question  has  arisen,  have  been  contests  between  cred- 
itors claiming  by  way  of  pledge  and  the  syndics  of  the 
failing  debtor,  who  stand  in  the  place  occupied  by  the 
receiver  here.  If  there  is  any  distinction  between 
them  it  is  in  favor  of  a  firmer  right  on  the  part  of  the 
i"eceiverto  protect  the  interests  of  the  general  creditors. 
He  is  not  made  receiver  by  a  voluntary  assignment  of 
the  bank,  but  is  appointed  by  the  magistrate  in  invi- 
tum  the  bank,  for  the  very  purpose  of  securing  equal 
justice  to  all  its  creditors  and  under  a  law  which 
sternly  forbids  preferences.  Surely  such  an  officer, 
whatever  may  be  the  rule  in  the  case  of  voluntary 
assignments,  may  assert  those  rights  of  the  general  cred- 
itors which  the  law  itself  creates,  without  being  subject 
to  all  the  disabilities  under  which  the  bank  would  labor 
in  combating  its  private  engagements  with  favored 
creditor.s.  If  the  law  sa3^s  *  there  shall  be  no  privilege, 
as  to  third  persons,  by  a  pledge  without  possession,' 
there  will  be  no  need  of  a  judgment  and  execution 
in  order  to  oppose  such  a  pledge,  if  only  a  creditor, 
or  one  who  represents  creditors,  has  a  proper  stand- 
ing in  court.  Insolvency  of  the  debtor,  if  a  bank^  and 
the  appointment  of  a  receiver  thereof,  will  force  the 
pledgee  into  concurrence  with  the  general  creditors  ; 
and  the  receiver's  power  will  be  fully  adequate  to  the 
protection  of  their  interests  as  established  by  law.  The 
case  of   Bank   of   Alexandria  vs.  Herbert  (8  Cranch, 


Right  op  Other  Creditors  to  Seize  Pledge.      219 

36),  presents  a  state  of  things  almost  precisely  analo- 
gous to  this.  There,  the  trustee  of  an  insolvent  debtor 
recovered  the  proceeds  of  property  which  the  latter 
had  mortgaged  to  the  bank.  The  recovery  was  had 
on  the  ground  that  the  mortgage  had  not  been  re- 
corded in  proper  time  under  the  law  of  Virginia, 
which  declared  that  all  deeds  and  mortgages,  though 
good  between  the  parties,  should  be  void  as  to  cred- 
itors and  subsequent  purchasers  without  notice,  unless 
recorded  within  eight  months  from  date.  'To  set  up 
this  deed  against  the  creditors,'  said  Mr.  Chief  Jus- 
tice Marshall,  'would  be  to  defeat  the  very  object  for 
which  the  law  was  made.' 

"  Indeed,  it  may  be  laid  down  as  a  general  rule, 
as  well  at  the  Common  law  as  at  the  Civil  law,  that 
a  trustee,  assignee  or  syndic,  having  the  powers  and 
occupying  the  relations  which  are  sustained  by  a 
receiver  under  the  National  Banking  Act,  or  an 
assignee  in  bankruptc}-,  may  well  oppose  any  privi- 
lege or  preference  which  the  law  itself,  unaided  by  a 
bona  fide  purchase  or  judgment,  would  regard  as  void 
against  the  general  creditors  in  a  direct  contest  between 
them  and  the  parties  claiming  such  privilege  or  prefer- 
ence ;  even  though  the  debtor  himself,  on  account  of 
some  personal  disability  arising  from  his  own  acts  or 
en2;a2:ements,  could  not  resist  the  claim.  That  an 
assignee  in  bankruptcy  has  this  power  can  not  well  be 
doubted  ;  and  since  a  national  bank  can  not  be  put  in 
bankruptcy,  but  can  only  be  wound  up  under  the 
peculiar  provisions  of    the  banking  act^  the  receiver 


220  The  Law  of  Pledge. 

appointed  by  virtue  thereof  must  have  the  same  power, 
or  the  absurd  consequence  would  follow,  that  the 
property  of  a  bank  disposed  of  by  voluntary  convey- 
ances, or  pledges  not  good  as  to  third  persons,  would 
be  beyond  the  reach  of  creditors. 

"  Where  the  legal  or  equitable  property  in  a  security 
passes,  and  there  is  no  express  law  invalidating  the 
transfer,  the  creditor  will  be  entitled  to  hold  it  as  well 
against  the  assignee  or  receiver  as  against  the  debtor ; 
because  the  assignee  only  takes  such  title  as  the  debtor 
has  at  the  time  of  the  assignment  or  insolvency.  In 
that  case,  however,  the  question  of  fraud  would  be 
admissible  as  a  question  of  fact  to  invalidate  the  trans- 
action," * 

265.  Justice  Bradley* took  no  notice  in  this  case  of 
a  decision  of  the  Court  of  Louisiana,  alluded  to  above, 
and  which  was  cited  by  counsel  as  authority  in  favor 
of  the  pledgee  against  the  doctrine  so  well  advocated 
by  the  distinguished  justice  of  the  Supreme  Court 
of  the  United  States.  That  was  the  case  of  Brother, 
Syndic,  vs.  Saul,  11  La.  An.  225,  in  which  the 
Court  of  Louisiana  held  that  the  syndic  could  not 
contest  the  validity  of  a  pledge  on  the  ground  that  no 
act  in  writing  had  been  passed  as  demanded  by  the 
Civil  law,  and  particularly  by  the  statute  law  of  Louis- 
iana.f  The  case  was  decided  by  a  divided  Court,  which 
could  hardly-  not  have  been  divided  on  the  question 
at  issue,  as  tlie  law  of  that*  State  expressly  provides 

*  Casey  vs.  Cavaroc,  90  U.  S.  487. 
t  Civil  Code  of  Louisiana,  Art.  3158. 


Right  of  Other  Creditors  to  Seize  Pledge.      221 

that  the  contract  of  pledge  unless  evidenced  by  an  act 
in  writing,  does  not  give  a  privilege  to  the  pledgee, 
and  can  not  affect  other  creditors  The  reasoning  of 
Justice  Bradley  on  this  point  may  be  considered  as  a 
complete  refutation  of  the  ruling  of  the  Louisiana  Court. 
That  Court  based  its  judgment  upon  the  ground 
that  the  want  of  the  written  act  was  a  mere  infor- 
mality which  did  not  invalidate  the  pledge.  But,  so 
far  as  other  creditors  were  concerned,  this  was  not  an 
informality ;  it  was  the  absence  of  an  indispensable 
condition  of  the  pledge,  of  a  condition  without  which 
the  pledgee  was  not  entitled  to  a  preference,  and  was 
placed  on  a  level  with  the  other  creditors.  If  the 
pledgeor  had  not  gone  into  insolvency,  every  one  of 
those  other  creditors  could  have  demanded  the  invali- 
dation of  the  pledge  for  want  of  the  written  act.  Is 
it  not  clear  that  the  syndic,  who  is  their  agent  under 
the  law,  to  protect  their  rights,  has  the  power  to  do 
for  them  collectively  what  they  could  have  done 
themselves  individually  before  the  insolvency.^  If  the 
syndic  had  not  demanded  the  invalidation  of  the 
pledge  for  their  account,  and  had,  in  the  proposed 
distribution  of  the  insolvent's  assets,  recognized  the 
pledgee  as  a  preferred  creditor,  can  there  be  any 
doubt  that  the  other  creditors  could  have  opposed  the 
distribution  and  pleaded  the  nullity  of  the  pledge  on 
the  ground  that  the  absence  of  the  written  act  deprived 
the  pledgee  of  any  right  of  preference.^ 


CHAPTER  XX. 

The  Pledgee   Must  Take    Proper    Care  of  the 

Pledge 

266.  The  pledgee  is  under  the  obligation  to  take 
proper  care  of  the  pledge,  according  to  the  nature  of 
the  thing  pledged.  If  it  is  damaged  or  lost  through 
his  fault,  he  is  responsible  for  the  value  of  it  to  the 
pledgeor.  He  may  even  be  held  liable  for  not  causing 
the  thing  pledged  to  produce  the  fruits  or  income 
which  it  is  susceptible  of  producing.  The  Codes  of 
France  and  Louisiana  provide  for  this  obligation  of 
the  pledgee  in  the  following  terms  :  "  The  creditor  is 
answerable  agreeably  to  the  rules  which  have  been 
established  under  the  title  :  Of  Conventional  Obliga- 
tions, for  the  loss  or  decay  of  the  pledge,  which  may 
happen  through  his  fault."  * 

The  care  which  the  pledgee  is  thus  to  take  of  the 
thing  pledged  as  an  implied  condition  of  the  contract, 
is  the  same  which  a  prudent  man  takes  of  his  own 
property;  but,  as  this  may  be  too  indefinite,  for  all 
men,  even  if  prudent  in  the  administration  of  their 
own  affairs,  may  not  be  so  in  the  same  degree,  the 
law  fixes  the  extent  of  the  pledgee's  responsibility  by 
rendering  him  liable  for  even  a  light  fault,  but  not  for 
the  lightest  fault.  The  principle  comes  from  the 
Roman  law,  and  is  stated  by  Pothier  in   these  words : 


*  Code  Napoleon,  Art.  2080. 
Civil  Code  of  Louisiana,  Art.  3](i7. 
223 


224  The  Law  of  Pledge. 

"•  The  care  to  which  the  creditor  is  bound,  is  only  the 
ordinary  care  which  prudent  men  usually  bring  into 
their  own  affairs.  It  is  not  demanded  of  him  that  he 
should  use  exactissiniaui  diligeniiam^  of  which  few 
persons  are  capable ;  and  he  is  onl}-  liable  for  the  fault 
they  call  the  light  faulty  de  levi  culpa',  he  is  not  liable 
delevissiina  culpa.  It  is  what  is  very  clearly  decided 
by  the  law  5,  Sec.  2,  Jf.  Commod.^  where  the 
contract  of  pledge  is  expressly  reported  among 
the  contracts  which  are  for  the  mutual  benefit 
of  the  contracting  parties,  in  which  the  debtor  is  liable 
for  the  ordinary  fault ;  and  they  are  distinguished  in 
that  from  the  loan,  commodatum^  which  being  for  the 
sole  benefit  of  the  one  who  receives  the  loan,  demands 
of  him  a  orreater  care  than  the  ordinarv  care  which 
those  contracts  demand  which  are  for  the  mutual  ben- 
efit of  the  contracting  parties."'  ^ 

267 .  The  rule  of  the  Common  law  is  the  same  on  this 
subject.  Judge  Story  says  in  similar  terms:  "  Hav- 
ing considered  the  rights,  the  next  inquiry  is  as  to  the 
duties  of  the  pawnee.  And  here  the  question  natur- 
ally presents  itself,  What  is  the  degree  of  diligence 
imposed  upon  the  pawnee,  in  respect  to  the  preserva- 
tion thereof?  As  the  bailment  is  for  the  mutual  ben- 
efit and  interest  of  both  parties^  the  law  requires,  upon 
the  principles  already  stated,  that  the  pawnee  should 
use  ordinar}'  diligence  in  the  care  of  the   pawn  ;  and 


*  Pothier,  Nantissement,  Sec.  34. 
Laurent,  Xantissement,  Sec.  524. 
Pont,  Xantissement,  Sec.  1170  et  seq. 
Baudry-Lacantinerie,  Xantissement,  Sec.  96. 


Pledgee  Must  Take  Proper  Care  of  Pledge.      225 

consequently  he  is  liable  for  ordinary  neglect  in  keep- 
ing the  pawn."* 

268.  Owing  to  the  principle  that,  at  Common  law, 
the  pledgee  has  a  right  of  property  in  the  pledge, 
Lord  Coke  had  declared  that,  if  the  thing  pledged 
were  stolen  from  the  pledgee,  he  was  not  responsible 
to  the  pledgeor  because  he  had  not  to  keep  the  thing 
otherwise  than  his  own  This  doctrine  was  rejected 
and  criticised  by  Sir  William  Jones.  But  neither  the 
reasoning  of  Lord  Coke  nor  that  of  Sir  William  Jones 
seem  to  have  been  accepted  by  Chancellor  Kent  and 
Judge  Story.  The  true  doctrine  is  clearly  expressed 
by  the  latter  in  the  following  manner:  "The  true 
principle  supported  by  the  authorities  seems  to  be, 
that  theft,  pe?'  se,  establishes  neither  responsibility 
nor  irresponsibility  in  the  bailee.  If  the  theft  is  occa 
sibned  by  any  negligence,  the  bailee  is  responsible  ; 
if  without  any  negligence,  he  is  discharged.  Ordinary 
diligence  is  not  disproved,  even  presumptively,  b/ 
mere  theft ;  but  the  proper  conclusion  must  be  drawn 
from  weighing  all  the  circumstances  of  the  particular 
case.  This  is  the  just  doctrine,  to  which  the  learned 
mind  of  Mr.  Chancellor  Kent  has  arrived  after  a  large 
survey  of  the  authorities,  and  it  seems  at  once  rational 
and  convenient."  f 

269.  The  opinion  of  Judge  Story,  that  the  liability 
of  the    pledgee  in  the   preservation  and   care   of  the 

*  Story,  on  Bailments,  Sec.  332. 

.lones,  on  Pledges,  Sec.  403  et  seq. 
t  Story,  Bailments,  Sec.  338. 

Kent,  Comm.,  Vol.  2,  581. 

Schouler,  Bailments,  p.  190. 


226  The  Law  of  Pledge. 

pledge,  must  be  measured  from  all  the  circumstances 
of  the  particular  case,  coincides  with  that  of  the  Civil- 
ians. Mr.  Pont  says  :  "As  to  knowing  how  far  his 
responsibility  may  go,  it  is  a  question  of  fact  which 
must  be  left  to  the  appreciation  of  the  judges,  who,  in 
this  matter,  fulfil  the  office  of  jurors.  We  will  not, 
therefore,  enquire,  with  our  ancient  authors,  what 
must  be  understood  by  the  light  faulty  for  which, 
according  to  the  Digest,  the  pledgee  is  liable.  The 
judges  will  have  to  decide,  on  this  point,  according 
to  circumstances,  the  nature  of  the  thing  pledged,  the 
character  of  the  injurious  acts  ;  and  they  will  pro- 
nounce in  last  resort  if  the  facts  proved  against  the 
pledgee  render  him  responsible  or  not."  * 

270.  From  the  nature  of  the  thing  pledged  the 
pledgee  would  be  clearly  responsible  if  he  neglected 
to  have  a  promissory  note,  the  subject  of  the  pledge, 
protested  for  non-payment,  and  the  endorser  was  dis- 
charged in  consequence. f  Or,  if  he  neglected  to  have 
the  mortgage,  which  is  pledged  to  him,  reinscribed 
or  reregistered  in  proper  time,  and  it  lost  its  rank  or 
effect. J  Or,  if  he  neglected  to  have  a  policy  of  insur- 
ance, taken  in  his  name,  renewed  when  requested  by 
the  pledgeor  to  do  it.  But  there  are  acts  of  adminis- 
tration or  preservation  of  the  thing  pledged,  which, 
from  its    nature,  the  pledgee  is    not  expected  to  do. 


*  Pont,  Xantissement,  Sec.  1172. 
t  Schouler,  Bailments,  p.  193. 

Whitteu  vs.  AVright,  34  Mich.  92. 

Russell  vs.  Hester,  10  Ala.  535. 
J  Baudry-Lacantinerie.  Xantissement.  Sec.  137.  p.  104 

Court  of  Cassation,  21  November,  1S94. 


Pledgee  Must  Take  Proper  Care  of  Pledge.      227 

and  for  the  abstention  from  which  he  can  not  be  held 
liable,  when  such  acts  demand  special  skill  or  knowl- 
edge. For  instance  when  wine,  which  must  be  treated 
and  nursed '\r\  a  special  manner,  is  pledged,  the  pledgee 
is  not  expected  to  have  it  done,  unless  in  case  of  spe- 
cial agreement  with  the  pledgeor.'" 

Pledgeor    is  Obliged  to  Refund   Pledgee's 
Expenses  in  Preserving  the  Pledge. 

271.  The  pledgeor,  on  his  part,  is  obliged  to  refund 
to  the  pledgee  all  the  necessary  expenses  which  he 
has  incurred  to  preserve  the  pledge.  The  principle  is 
enacted  in  the  Napoleon  Code  and  the  Civil  Code  of 
Louisiana.  '*^  On  his  part,  the  debtor  is  bound  to  pay 
to  the  creditor  all  the  useful  and  necessary  expenses 
which  the  latter  has  made  for  the   preservation  of  the 

pledge."  t 

The  commentators  of  the  French  Code  are  unani- 
mous in  their  criticism  of  the  phraseology  of  this 
article,  and  are  of  the  opinion  that,  so  far  as  the 
necessary  expenses  incurred  by  the  pledgee  are  con- 
cerned, they  must  be  refunded  to  him  ;  but  that  for  the 
expenses  which  are  merely  useful^  a  distinction  must 
be  drawn,  a  distinction  taken  from  the  Roman  law 
and  founded  upon  the  very  nature  of  things.  The 
necessary  expenses,  those  without  which  the  thing 
pledged  would  have  perished  or  suffered  a  great  loss 


*  Baudry-Lacantinerie,  Xantissement,  Sec.  139,  p.  105. 

Pont,  Nantissement,  Sec.  117.5. 
t  Code  Napoleon,  Art.  2080. 

Civil  Code  of  Louisiana,  Art.  31 07. 


228  The  Law  of  Pledge. 

of  value,  must  be  paid  back  to  the  pledgee  in  full ; 
because  the  pledgeor  would  have  made  them  himself 
if  he  had  remained  in  possession  of  the  pledge.  But, 
as  to  the  expenses  which  were  only  useful,  those  which, 
though  adding  to  the  value  of  the  thing,  were  not 
indispensable,  the  pledgeor  owes  only  to  the  pledgee 
the  amount  corresponding  to  the  additional  value  of 
the  pledge.  If  the  pledgee  has  spent  more  than  such 
additional  value,  the  excess  of  expenses  remains  at  his 
charge.  The  question  of  the  additional  value  pro- 
duced by  the  useful  expenses  is  a  question  of  fact, 
which  is  necessarily  left  to  the  appreciation  of  the 
judge^  to  be  decided  from  the  evidence.* 

273.  We  should  note  that  the  pledgee  has,  for  the 
payment  of  the  necessary  expejises  incurred  for  the 
preservation  of  the  pledge,  the  same  privilege  and 
right  of  preference  over  the  proceeds  of  the  thing 
pledged  that  he  has  for  the  payment  of  his  debt  itself. 
Such  expenses  are  added  to  the  debt  and  become  part 
of  it,  and,  therefore,  are  secured  in  the  same  manner, 
b}-  the  terms  of  Art.  2102  of  the  Napoleon  Code,  and 
Art.  3217  of  the  Civil  Code  of  Louisiana.  But  this 
privilege,  it  seems,  does  not  extend  to  the  expenses 
incurred  b}'  the  pledgee,  which  were  merely  useful, 
and  not  indispensable,  and  have,  however,  added  to 
the  value  of   the  thing  pledged.      For  the  additional 

*  Troplong,  Xantissement,  See.  434. 
Pont,  Nantissement,  8ec.  1170. 
Duranton,  Nantissenient.  Sec.  M'2. 
Laurent,  Nantissenient,  Sec.  526. 
Baudry-Lacantinerie,  Nantissement,  Sec.  143. 
Aubry  et  Ran.  Nantisseinent,  Vol.  3,  p.  10. 
Fothier,  Nantissenient,  Sec.  01. 


Pledgee  Must  Take  Proper  Care  of  Pledge.      229 

value,  as  we  have  just  seen,  the  pledgeor  is  indebted 
to  the  pledgee,  but  this  obligation  is  not  secured  b}- 
the  pledge.  Such  is  the  opinion  of  Laurent  and  of 
Baudr}'-Lacantinerie.'^ 

273.  -The  correlative  obligation  of  the  pledgeor  to 
refund  to  the  pledgee  the  expenses  incurred  in  the 
administration  or  for  the  preservation  of  the  thing 
pledged,  does  not  seem  to  have  been  either  estab- 
lished or  properly  understood  in  the  Common  law 
at  the  time  that  Judge  Story  wrote  his  treatise  on 
Bailments,  for  he  says  :  "Another  obligation  of  the 
pawner  by  the  Civil  law  is  to  reimburse  to  the  pawnee 
all  expenses  and  charges  which  have  been  necessarily 
incurred  by  the  latter  in  the  preservation  of  the  pawn, 
even  though  by  some  subsequent  accident  these  ex- 
penses and  charges  may  not  have  secured  any  perma- 
nent benefit  to  the  pawner.  No  decision  has  been 
found  in  the  Common  law  upon  this  point.  If  there 
is  an  express  contract  to  pay  such  expenses,  that  would 
doubtless  gov^ern  the  case.  And  where  the  circum- 
stances of  the  case  would  naturally  lead  to  an  implied 
agreement  to  the  same  effect,  it  would  be  equivalent 
to  an  express  declaration.  But  whatever  might  be 
the  rule  as  to  ordinary  expenses  and  charges  in  case 
of  mutual  silence,  it  would  seem  reasonable  to  pre- 
sume that  extraordinary  expenses  and  charges,  which 
could  not  have  been  foreseen,  should  be  at  the  charge 
of  the  pawner.      If,  for  instance,  a  horse  is   pawned 

*  Laurent,  Nantissement,  Sec.  520. 
Baudry-Lacantinerie,  Nantissement,  Sec.  145. 
./d.,  Des  Privileges  et  Hypotheques,  Sec.  478. 


230  The  Law  of  Pledge. 

and  he  meets  with  an  injury  b}-  accident,  the  expense 
of  his  cure  might  be  justly  deemed  to  be  borne  by  the 
pawner,  as  they  would  be  for  his  ultimate  profit. 
So,  if  goods  pawned,  as,  for  instance,  a  ship,  be  in- 
jured ill  a  storm,  and  expenses  are  necessary  to  pre- 
serve her  from  absolute  foundering,  such  expenses 
would  seem  properly  to  fall  on  the  owner. 

"In  respect  to  expenses  not  necessary,  but  still  use- 
ful to  the  thing  pawned,  the  Civil  law  pursued  a  middle 
course,  and  left  them  to  be  allowed  or  disallowed  by 
the  proper  judicial  tribunal,  according  to  circum- 
stances. If  moderate  and  beneficial,  they  might  be 
allowed  at  its  discretion.  The  Common  law  is  not 
supposed  to  invest  any  courts  of  justice  with  any  such 
discretion,  or  to  allow  to  the  pawnee  any  such  latitude 
of  expenditure  without  the  approbation  of  the  pawner^ 
either  express  or  implied,"* 

274.  Since  Judge  Stor3''s  time,  the  Common  law 
has  advanced  in  this  respect,  and  Mr.  Jones  tells  us 
that  a  pledgee  is  entitled  to  all  necessarj^  expenses 
incurred  in  keeping  and  caring  for  the  pledge  ;  that 
he  is  also  entitled  to  be  i^eimbursed  for  all  pay- 
ments made  to  protect  the  property  from  prior 
liens  or  incumbrances,  and  for  all  necessary  paj^- 
ments  made  in  any  other  way  to  preserve  or  pro- 
tect the  security.  Thus,  if  a  pledgee  of  a  policy 
of  insurance  advances  money  for  the  payment  of 
premiums  during  the  continuance  of  the  pledge,  he 
is  entitled  to  be  credited  the  amount  of  such  payments 

*  story,  on  Bailments,  Sees.  357,  358. 


Pledgee  Must  Take  Proper  Care  of  Pledge.      231 

in  his  account  with  his  debtor.  And  assessments 
rightfully  paid  by  a  creditor  upon  stock  pledged  to 
him  as  collateral  security  are  charges  in  the  nature 
of  expenses,  and  must  be  refunded  by  the  debtor,  as 
a  condition  precedent  to  reclaiming  the  pledge.  In 
support  of  this  doctrine  several  cases  are  cited  by 
the  same  writer.* 

Mr.  Schouler  entertains  the  same  views  on  this 
subject,  and  cites  the  same   authorities. f 

Right  of  Pledgee  to  Demand  Another  Pledge. 

275.  If  the  pledgee  has  been  deceived  in  the  nature 
of  the  thing  pledged;  and  thereby  as  to  the  sufficiency 
of  the  security,  he  may  demand  of  the  pledgeor  another 
pledge  instead,  or  claim  the  immediate  payment  of 
the  debt,  though  it  has  been  contracted  on  terms  of 
credit  which  have  not  3^et  matured.  The  Civil  Code 
of  Louisiana  has  expressly  enacted  the  principle. 
*' When  the  creditor  has  been  deceived  on  the  sub- 
stance or  quality  of  the  thing  given  in  pledge,  he  may 
claim  another  thing  in  its  stead,  or  demand  imme- 
diately his  payment,  though  the  debtor  be  solvable. "J 

The  Code  Napoleon  contains  no  provision  of  the  sort 
bearing  expressly  upon  the  contract  of  pledge.  But  the 
same  rule,  as  derived  from  the  Roman  law,  is  recognized 


*  Jones,  on  Pledges,  Sec.  400. 

Starrett  vs.  Barber,  20  Me.  457. 

Hills  vs.  Smith,  28  N.  H.  309. 

Railey  vs.  Ross,  59  Ga.  862. 

Rowan  vs.  State  Bank,  45  Vt.  IGO. 

McCalla  vs.  Clark,  55  Ga.  53. 
t  Schouler,  Bailments,  p.  199. 
X  Civil  Code  of  Louisiana,  Art.  3174. 


232  The   Law  of  Pledge. 

in  the  French  jurisprudence,  and  the  commentators 
support  it  by  Article  1188  of  the  Napoleon  Code, 
which  provides  that :  "  The  debtor  can  no  longer  claim 
the  benefit  of  the  term  (of  payment),  when  he  has. 
failed^  or  when,  by  his  own  act^  he  has  diminished 
the  securities  which  he  had  given  by  the  contract  to 
his  creditor."^ 

The  source  of  this  principle  is  the  actio  pignoratitia 
contraria^  given  to  the  creditor  against  the  debtor  to 
compel  the  fulfilment  cf  the  latter's  obligations,  the 
converse  of  the  actio  ■pignoratitia  directa^  given  to 
the  debtor  against  the  creditor  to  compel  the  fulfil- 
ment of  his  obligations. f 

276.  Under  this  rule  if  the  pledgeor  has  given  in 
pledge  a  thing  which  does  not  belong  to  him,  with- 
out the  authority  of  the  owner,  and  the  pledgee  was 
unaware  of  the  fact,  he  may  rescind  the  contract  and 
demand  immediate  payment,  or  accept  some  other 
pledge  instead.  The  security  is  evidently  insufficient 
if  he  is  exposed  to  the  risk  of  losing  it  by  the  action 
of  the  true  owner  demanding  his  property.  And, 
even  in  France,  where  the  true  owner  can  not  recover 
his  property  wrongfully  pledged,  under  the  principle 
that  the  possession  of  personal  property,  or  movables, 
is  equivalent  to  title,  it  has  been  held  that  the  pledgee 
in  such  cases  has  the  right  to  repudiate  the  pledge  on 
the  ground  that  it  is  against  his  conscience  to  retain 
property    not    belonging    to    his    pledgeor;    and    the 

*  Code  Napoleon.  Art.  1188. 
t  Ulpian,  L.  1,  Sec.  2,  D.,  D". ingnovatitia  actione. 
Troplong,  Xantissement,  Sees.  29,  30. 


Pledgee  Must  Take  Proper  Care  of  Pledge.       233 

latter  can  not  impose  upon  him  the  obHgation  of 
retaining  the  pledge  on  the  ground  that  he  is  secured 
because  the  true  owner  can  not  recover  asainst  him 
his  property  even  though  wrongfully  pledged.  But 
in  all  such  cases  if  the  creditor  had  knowledge  of  the 
vice  or  defect  in  the  thing  pledged,  or  if  he  himself 
was  in  bad  faith  in  the  transaction,  he  would  be 
debarred  of  the  right  of  demanding  a  new  pledge,  or 
of  claiming  immediate  payment  of  his  debt.  ''^ 

277.  The  Common  law  does  not  seem  to  contain 
the  principle  by  virtue  of  which  the  pledgee,  deceived 
in  the  nature  or  quality  of  the  pledge,  can  demand 
another  pledge  in  its  stead  or  the  immediate  payment 
of  his  debt.  Under  that  system  the  pledgee  is  simply 
relegated  in  such  cases  to  an  action  for  damages. 
Judge  Story  lays  down  the  doctrine  in  these  words: 
"  If  the  pawn  has  a  defect,  unknown  to  the  pawnee, 
which  destroys  its  value,  the  Civil  law  gives  him  a 
right  of  action  for  another  pawn  in  its  stead.  This 
seems  highly  reasonable  ;  the  Common  law,  however, 
gives  no  such  right.  But,  in  such  a  case,  if  there  is 
any  fraud  practised  by  the  pawner,  an  action  for  dam- 
ages will  doubtless  lie  against  him,  and  perhaps,  also, 
the  whole  contract  may,  at  the  option  of  the  pawnee, 
be  rescinded."  f 

The  later  writers  of  the  Common  law  do  not  show 
that  the  rule  has   changed   since  Judge  Story's  time. 

*  Pont,  Nantissement,  Sec.  1074. 

Laurent,  Nantissement,  Sec.  440. 

Baudry-Lacantinerie,  Nantissement,  Sec.  32. 

Pothier,  Nantissement,  Sees.  57,  58. 
t  Story,  Bailments,  Sec.  355. 


234  The  Law  of  Pledge. 

The  sole  remedy  of  the  pledgee  when  fraud  has  been 
practised  by  the  pledgeor,  is  yet  to  claim  damages  if 
he  suffers  any.  But  the  only  damage  that  the  pledgee 
can  suffer  from  the  deficienc}-  of  his  securit}-,  is 
the  loss  of  the  money  loaned  to  the  pledgeor.  His 
suit  for  damages  amounts,  therefore,  simpl}'  to  a  suit 
for  the  recovery  of  his  debt.  If  the  debtor  is  solvent, 
the  creditor  recovers  his  mone}-  and  suffers  no  dam- 
age. If  the  debtor  is  insolvent,  the  creditor  obtains  a 
judgment  for  damages,  but  does  not  recover  his 
money.  The  remedy  is  therefore  purely  illusive. 
And  if  the  pledgeor  has  not  been  guilty  of  fraud  in 
giving  the  pledge,  which  yet  is  defective  and  insuffi- 
cient, or  worthless^  the  pledgee  has  no  action  for 
damages.  In  that  case  he  can  only  demand  the 
return  of  the  loan  when  the  same  becomes  due.  The 
position,  right  and  remedy  of  the  pledgee  are  there- 
fore the  same  so  far  as  the  security  is  concerned, 
whether  the  pledgeor  has  been  guilty  of  fraud  or  not 
in  inducing  the  pledgee  to  accept  a  worthless  pledge. 


CHAPTER  XXI. 

PowER-OF- Attorney  to  Sell  the  Pledge  not 
Revoked  or  Annulled  by  the  Bankruptcy  or 
Death  of  Pledgeor. 

278.  In  the  event  of  the  bankruptcy  or  death  of 
the  pledgeor,  the  power  of  attorne}-  given  by  him  to 
the  pledgee,  or  to  some  third  person  in  the  interest  of 
the  pledgee,  to  sell  the  pledge,  when  in  default,  and 
satisfy  the  debt  from  the  proceeds,  is  not  revoked  or 
annulled  by  the  bankruptcy  or  death  of  the  pledgeor, 
under  the  principles  of  the  law  of  agenc3\  The 
power  of  attorney  in  that  case  is  of  the  kind  known  in 
the  Common  law  as  "coupled  with  an  interest," 
and  in  the  Roman  law  as  that  of  the  procurator'  in 
rem  siia?n.  It  is  not  under  the  rule  which  we  have 
just  considered,  that  the  pledgee  is  not  bound  to  sur- 
render the  pledge  to  the  assignee  of  the  pledgeor.  It 
is  under  an  exception  to  the  rule  of  the  law  of  agency 
that  the  bankruptcy  or  death  of  the  mandator  puts  an 
end  to  the  mandate. 

The  procuration,  in  such  case,  being  given  in  the 
interest  of  the  pledgee  and  for  a  consideration,  forms 
part  of  the  contract,  enters  into  its  obligation,  and  is 
no  more  revocable  by  the  bankruptcy  of  the  man- 
dator than  at  his  will.  In  the  contract  of  pledge, 
when  the  pledgeor  appoints  either  the  pledgee  himself 
or  a  third  person  his  agent  to  sell  the  thing  pledged 
in  default  of  payment,  it  is  precisely  in  view  of  the 

235 


236  The  Law  of  Pledge. 

pledgeor's  insolvency  or  bankruptcy,  or  death,  that 
such  power  of  attorney  is  stipulated  for  by  the  pledgee 
as  a  consideration  for  the  loan,  in  order  to  save  him 
from  the  consequences  of  its  revocation. 

279.  In  case  of  bankruptcy,  the  Supreme  Court  of 
the  United  States  said  on  this  subject :  "  The  position 
that  the  pledgee  could  not  sell  the  pledge  after  the 
adjudication  in  bankruptcy,  is  quite  untenabl-e.  It  is 
sustained  by  nothing  in  the  Bankrupt  Act.  The  bonds 
were  negotiable  instruments.  They  passed  by  deliv- 
ery, and  even  were  there  no  expressed  stipulation  in 
the  contracts  of  pledge,  that  the  pledgee  might  sell 
on  default  of  the  pledgeor,  such  a  right  is  presumable 
from  the  nature  of  the  transaction.  Certainly  the 
Bankrupt  Act  has  taken  away  no  right  from  the 
pledgee  secured  to  him  by  his  contract."  * 

280.  The  Court  of  Louisiana,  commenting  upon 
the  article  of  the  Civil  Code  of  that  State  which  pro- 
vides that  a  power  of  attorney  is  revoked  by  the  death 
or  insolvency  of  the  mandator,  says:  "The  article 
was  copied  from  the  Code  Napoleon  and  was  a  prin- 
ciple equally  of  the  Roman  law  and  of  universal  juris- 
prudence. It  has  been  universally  held  that  it  did 
not  apply  to  what,  at  Common  law,  are  known  as 
powers  coupled  with  an  interest,  corresponding  to 
those  which,  in  the  terminology  of  the  Roman  law, 
made  the  mandatory  a  ''  ■procurator  in  rem  suam.'' 
Thus  the  French  Court  of  Cassation  held  that  a  man- 
date conferred   in  the  interest  of  the  agent   as  well  as 

*  Jerome  vs.  McCarter,  94  U.  S.  739. 


Power-of-Attorney  to  Sell  Pledge.  237 

of  the  principal,  and  as  a  condition  of  a  contract  passed 
between  them,  is  essentially  irrevocable,  and  is  not 
revoked  by  the  failure  of  the  principal/'  * 

And  the  Court  cites  in  support  of  its  opinion 
authorities  taken  equally  from  the  Civil  and  the  Com- 
mon law,  showing  the  perfect  accord  of  the  two  great 
systems  on  this  subject, f  so  far  as  the  bankruptcy  of 
the  pledgeor  is  concerned.  But  in  case  of  the  death 
of  the  pledgeor  or  mandator,  we  will  see  that  they  are 
wide  apart,  on  the  principle  of  the  kind  of  27iterest 
coupled  with  the  power  of  attorney,  which  renders  it 
irrevocable. 

281.  As  far  back  as  the  year  1823,  the  Supreme 
Court  of  the  United  States,  in  the  well-known  case  of 
Hunt  vs.  Rousmanier's  Administrators,  said  that  the 
power  of  attorney  given  by  a  mortgageor  to  the  mort- 
gagee to  sell  the  property-  mortgaged,  for  the  purpose 
of  paying  himself,  was  not  revoked  by  the  death  of 
the  mortgageor,  because  such  power  of  attorney  was 
coupled  with  an  interest. 

In  that  case  Chief  Justice  Marshall,  who  delivered 
the  opinion  of  the  Court,  drew  a  very  fine  distinction, 
perhaps  more  subtle  than  real,  between  the  "interest 
in  the  subject  on  which  the  power  is  to  be  exercised 
and  the  interest  in  that  which  is  produced  by  the 
exercise  of  the  power."  The  substance  of  the  very 
learned  and  metaphysical  dissertation  of  the  great 
Chief    Justice  on  that  subject  is  that  the  power  to  sell, 


*  Renshaw  vs.  Creditors.  40  La.  An.  40. 
t  Allen,  Bush  &  West  vs.  Nettles,  39  La.  An.  791. 
Jacquet  vs.  His  Creditors,  38  La.  An.  863. 


238  The  Law  of  Pledge. 

coupled  with  an  interest  is  only  irrevocable  by  the 
death  of  the  principal  if  his  title  to  the  property''  had 
been  conveyed  to  the  agent,  as  in  the  case  of  a  mort- 
gage ;  but  that,  if  the  power  of  attorney  was  given  as 
security  of  the  debt^  without  conveyance  of  the  title, 
the  interest  of  the  creditor  with  which  the  power  of 
attorney  is  coupled  is  not  such  as  to  survive  the 
mandator.  In  other  words,  the  conveyance  to  be 
made  by  virtue  of  the  power,  if  the  title  is 
still  in  the  principal,  must  be  in  his  name, 
and  that  can  not  be  done  by  his  ao;ent  if  he  is  dead. 
"The  title,"  says  the  opinion,  "  can  regularly  pass 
out  of  the  person  in  whom  it  is  vested  only  b}'  a  con- 
veyance in  his  own  name ;  and  this  can  not  be 
executed  b}-  another  for  him^  when  it  could  not  in  law 
be  executed  b}'  himself.  A  conveyance  in  the  name 
of  a  person  who  was  dead  at  the  time  would  be  a 
manifest  absurdity.'  '* 

In  that  case,  the  power  of  attorney  was  given  by  the 
debtor  to  secure  the  creditor  for  sums  of  money  loaned 
by  him.  He  was  authorized  to  sell  two  vessels  of  the 
debtor  and  pay  himself ;  but  the  vessels  were  not 
mortgaged  or  conveyed  to  him.  In  the  meantime  the 
debtor  died.  The  Court  held  that  the  power  died  with 
him,  tlie  interest  of  the  creditor  in  it  not  being  such  as 
to  render  the  power  irrevocable. 

282.  The  great  authority  of  Chief  Justice  Marshall 
seems  tohavebeen  the  foundation  of  the  American  juris- 
prudence on  this  point.    But  there  does  not  seem  to  be  a 

*  Hunt  vs.  Rousnianier's  Adm.,  S  Wheaton,  382. 


Po\ver-of-Attorney  to  Sell  Pledge.  239 

perfect  harmony  in  that  jurisprudence,  and  there  are 
decisions  which  dissent  from  the  doctrine  estabHshed  in 
the  case  of  Hunt  vs.  Rousmanier's  Administrators,  in 
respect  to  the  kind  of  interest  coupled  with  the  power 
of  attorney  necessary  to  its  irrevocabihty.  The  sub- 
ject, at  all  events,  is  far  from  being  free  of  confusion 
and  embarrassment.  The  opinion  of  the  Court  in 
Hunt  vs.  Rousmanier's  Administrators  lays  down  the 
absolute  rule  that  the  interest  of  the  agent  must  be  in 
the  subject  itself,  not  in  its  proceeds,  and  that  the 
power  to  sell  must  have  been  preceded  or  accompa- 
nied by  a  conveyance  or  assignment  of  the  property 
to  the  agent;  in  other  words,  that  unless  the  legal 
title  is  in  the  agent  at  the  time  of  the  principal's  death, 
the  power  of  attorne}^  is  not  coupled  with  such  an  in- 
terest as  makes  it  irrevocable. 

283.  Judge  Story  has  adopted  this  doctrine  without 
qualification.  Speaking  of  the  revocation  of  the  power 
of  attorney  b}-  the  death  of  the  principal,  he  says : 
"  The  only  admitted  exception  in  our  law,  if,  indeed, 
that  properly  constitutes  an  exception,  is  the  case 
where  the  power  or  authority  is  coupled  with  an  in- 
terest in  the  thing  actually  vested  in  the  agent.  The 
reason  of  this  exception  is  entirely  compatible  with 
the  general  ground  on  which  the  rule  is  founded.  It 
IS,  that  the  agent,  having  the  legal  title  in  the  prop- 
erty is  capable  of  transferring  it  in  his  own  name,  not- 
withstanding the  death  of  the  principal ;  and  the  death 
of  the  principal,  therefore,  has  no  operation  upon  his 
act.    The  power  given  by  the  principal  is,  under  such 


240  The  Law  of  Pledge. 

circumstances,  rather  an  assent  or  agreement  that  the 
agent  may  transfer  the  property  vested  in  him  free 
from  any  equities  of  the  principal,  than  strictly  a  power 
of  attorney."'  * 

284.  It  is  therefore  easy  to  understand  and  apply 
the  rule  in  all  cases  of  pledge  where  the  contract  has 
taken  the  form  of  a  sale,  or  where  the  thing  pledged 
has  been  assigned  to  the  pledgee,  as  in  the  pledge  of 
choses  in  action,  or  in  the  pledge  of  promissory  notes 
endorsed  and  delivered  by  the  payee.  In  all  such 
cases  the  legal  title  being  in  the  pledgee,  it  is  evident 
that  the  death  of  the  pledgeor  will  not  revoke  the 
power  of  attorney  to  sell.  But  what  of  the  cases  in 
which  there  is  no  conveyance  or  assignment  to  the 
pledgee?  As  a  rule  he  has  no  legal  title  or  qualified 
property  in  the  pledge.  He  has  possession,  a  right  of 
treention  and  a  lien^  but  the  title  remains  in  the 
pledgeor.  This  is  elementary.  Under  the  authority 
of  Hunt  vs.  Rousmanier's  Administrators,  would  his 
interest,  as  coupled  with  his  power  of  attorney  to 
sell,  be  insufficient  to  prevent  its  revocation  bv  the 
pledgeor" s  death?  It  may  be  said  that  he  has  an  in- 
terest in  the  subject  itself,  the  thing  pledged,  to-w4t : 
possession,  retention  and  lien ;  but  the  authorities 
demand  more.  According  to  them,  he  must  liave 
the  title  in  himself,  or  he  can  not  sell  the  propert}'  of 
the  dead  man.  It  would  seem  that  the  dicta  in  the 
opinion  of  Hunt  vs.  Rousmanier's  Administrators 
have  gone  too   far  and  should    not  be  taken  to  the  let- 

*  Story,  Agency,  Sec.  4&9. 


PowER-OF- Attorney  to  Sell  Pledge.  241 

ter.  And  it  is  well  to  observe  that,  in  that  case,  the 
creditor  was  not  in  possession  of  the  property  which 
he  was  empowered  to  sell,  and  that  the  contract  with 
his  debtor  was  one  of  security,  but  not  a  pledge. 

However,  the  words  of  Chief  Justice  Marshall  have 
lost  none  of  their  authority  and  are  quoted  up  to  the 
present  day  on  that  subject.  * 

285.  But  the  courts  have  in  some  cases  departed 
from  the  rigid  rule  thus  established,  that  the  power 
of  attorney  to  sell  is  revoked  by  the  death  of  the  prin- 
cipal unless  the  legal  title  was  beforehand  in  the  agent ; 
and  they  have  held  such  power  irrevocable  by  death 
when  it  had  been  given  for  a  consideration,  in  the 
interest  of  the  agent,  even  when  he  had  neither  the 
legal  title  nor  the  possession,  f 

286.  The  rule  of  the  Civil  law  is  different  on  this 
point,  and  under  its  principles  the  power  of  attorney 
is  not  revocable  even  by  the  death  of  the  principal, 
the  moment  it  is  given  in  the  interest  of  the  agent  and 
enters  into  the  consideration  of  the  contract.  It  is  in 
no  manner  necessary  that  the  legal  title  of  the  prop- 
erty to  be  sold  by  the  agent  be  conveyed  to  him 
before  the  death  of  the  principal.  The  fact  is  that 
the  Common  law  tenure  of  property  by  legal  or 
equitable  title  is  unknown  to  the  Civil  law.  The  title 
may  be  simulated,  lawfully  or  unlawfully,  for  a  legal 
or  illegal  purpose,  but  it  is  not  subject  to  the  distinc- 
tion   created   by    the    Common    law.     The    pledgee, 

*  Walker  vs.  Walker,  125  U.  S.  342. 
t  Mechem,  Agency,  Sec.  241  et  seq. 
Am.  and  Eng,  Ency.  of  Law,  Agency,  pp.  445-(i. 


242  The  Law  of  Pledge. 

therefore,  who  holds  the  pledgeor's  power  of  attorney 
to  sell  the  pledge  in  default  of  payment,  is  in  no 
way  impeded  or  prevented  from  doing  so  by  the  death 
of  the  pledgeor,  as  his  mandate  is  irrevocable  to  all 
intents  and  purposes.  And  even  the  creditor  who  has 
no  pledge,  or  possession,  or  lien,  if  he  hold  the  power 
of  attorney  to  sell  by  virtue  of  a  single  contract  of 
security,  but  for  a  consideration,  may  sell  after  the 
debtor's  death,  the  mandate  being  irrevocable  in  that 
case  also.  The  question  of  lien,  or  preference  over 
creditors  is,  of  course,  pretermitted  under  such  cir- 
cumstances. 

287.  Troplong  states  the  principle  in  these  terms: 
"  There  are  powers  of  attorney  which  are  irrevocable. 
Such  is  the  case  of  the  procurator  in  rem  suain.'''' 
And  he  cites  the  words  of  Casaregis  :  ' '  Tale  ina)i- 
datiitn  revocari  no n  potest  nee  tacite  per  mortem^  uec 
per  expressani  revocationeniy  * 

And  again  :  "  It  is  not  always  necessary  that  there 
should  be  an  agreement  to  the  effect  that  the  mandate 
should  survive  the  mandator.  For  instance,  if  Peter 
empowers  you  to  collect  certain  sums  of  money  due 
him,  with  the  stipulation  that  you  employ  those  sums 
to  pay  yourself  the  debt  he  owes  you,  this  mandate 
shall  not  be  revoked  by  the  death  of  Peter ;  and  his 
heirs  shall  be  bound  to  allow  its  continuation.  And 
such  is  the  case  whenever  the  mandate  is  the  condi- 
tion of  a  contract,  or  the  means  of  executing  an 
obligation. "f 

*  Troplong,  Du  Mandat,  Sec.  718. 
t  Id.,  Ibid.,  Sec.  737. 


PowER-OF- Attorney  to  Sell  Pledge.  243 

288.  The  French  courts  have  appUed  the  rule  in 
several  instances,  whether  the  mandate  was  to  collect 
sums  of  money,  or  to  sell  property  of  the  mandator 
and  with  the  proceeds  to  pay  the  debt  due  by  him  to 
the  mandatary.*  This  is  the  very  case  of  the  creditor 
in  a  contract  of  security  in  which  the  Court  in  Hunt 
vs.  Rousmanier's  v-^dministrators  decided  that  the 
interest  of  the  creditor  as  coupled  with  the  power  of 
attorney  was  not  such  as  to  render  it  irrevocable. 

289.  The  Court  of  Louisiana  has  also  applied  the 
rule  of  irrevocability  of  the  power  to  sell  the  pledge 
after  the  death  of  the  pledgeor,  in  a  case  where  the 
pledge  was  created  by  statute  in  favor  of  the  con- 
signee by  bill  of  lading.  The  Court  said  :  ''  Here 
we  have  an  explicit  provision  that  the  mere  fact  of 
consignment  evidenced  by  bill  of  lading  shall  operate 
a  perfect  and  instantaneous  pledge,  with  the  absolute 
right  in  the  consignee  to  sell  and  pay  his  debt  with 
the  proceeds,  subject  to  no  limitation  except  in  favor 
of  existing  privileges,  which  means  privileges  existing 
prior  to  the  consignment-  It  is  impossible  to  conceive 
how  the  death  of  the  consig-nor  after  the  consignment 
could  defeat  such  clear  and  perfect  vested  rights  con- 
ferred by  the  law  itself.  The  proposition  is  really  not 
worthy  of  further  consideration. "f 


*  Sirey,  50,  II,  IGl. 

Rogron,  Code  Civil,  Art.  2003,  p.  2610. 
t  Allen,  West  &  Bush  vs.  Nettles,  39  La.  An.  791-2. 


CHAPTER  XXII. 
The  Pledge  is  by   Its  Nature  Indivisible. 

290.  The  pledge,  like  the  mortgage,  is  indivisible. 
Every  portion  of  the  thing  pledged  secures  every 
portion  of  the  debt.  The  pledgeor,  therefore,  can 
not,  after  paying  part  of  the  debt,  demand  the  return 
of  part  of  the  securities^  even  if  what  would  remain 
in  the  hands  of  the  creditor  would  be  more  than  suffi- 
cient to  pay  the  balance  of  the  debt.  The  conse- 
quence of  such  indivisibility  is  that,  if  the  pledgeor 
dies  during  the  existence  of  the  pledge,  and  one  of 
his  heirs  pay  his  proportionate  share  of  the  debt,  he 
is  not  entitled  to  the  surrender  of  a  corresponding 
part  of  the  pledge.  The  whole  pledge,  in  that  case, 
will  still  secure  the  balance  of  the  debt  due  by  the  co- 
heirs. This  is  provided  for  by  the  Code  Napoleon, 
the  various  Civil  Codes  of  the  countries  of  continental 
Europe  and  the  Civil  Code  of   Louisiana."^ 

291.  In  the  latter  State  the  statute  prescribes  that, 
when  several  things  have  been  pawned,  the  owner  can 
not  retake  one  of  these  without  satisfying  the  whole 
debt,  thougli  he  offers  to  pa}-  a  certain  amount  of  it 
in  proportion  to  the  thing  which  he  wishes  to  get. 
And  the  provisions  of  the  Civil  Code  carry  the  rule 
still  farther  and  state  that  the  pawn  can  not  be  divided 


*  Code  Napoleon,  Art.  2083. 
Civil  Code  of  Louisiana,  Arts.  3163,  317L 
Concordance  des  Codes,  by  De  St.  Joseph,  p.  2083. 
:!45 


246  The  Law  of  Pledge. 

notwithstanding  the  divisibilit}-  of  the  debt  between 
the  heirs  of  the  debtor  and  those  of  the  creditor.  The 
debtor's  heir,  who  has  paid  his  share  of  the  debt,  can 
not  demand  the  restitution  of  his  share  in  the  pledge 
so  long  as  the  debt  is  not  fully  satisfied.  And  respec- 
tively the  heir  of  the  creditor,  who  has  received  his 
share  of  the  debt,  can  not  return  the  pledge  to  the 
prejudice  of  those  of  his  co-heirs  who  are  not  satis- 
fied.^ 

292.  This  principle  being  of  the  nature  but  not  of 
the  essence  of  the  contract  of  pledge,  the  parties  may 
provide  differently  by  the  agreement. f 

293 .  The  principle  of  the  indivisibility  of  the  pledge, 
so  well  established  by  the  Civil  law,  has  been  recog- 
nized by  courts  of  Common  law  in  maintaining  the 
right  of  the  pledgee  to  refuse  to  return  some  of  the 
collateral  securities  to  the  pledgeor  until  the  whole 
debt  was  paid.  But  the  subject  does  not  seem  to 
have  been  of  much  interest  to  the  law  writers  of 
this  country,  and  the  American  jurisprudence  is 
meagre  in  regard  to  it.]t  Yet  the  matter  is  of  great 
importance.  The  contrary  rule  would  impair  the 
rights  of  the  pledgee  very  seriously.  It  would  vio- 
late the  very  letter  of  the  law  of  pledge  in  countries  of 
Civil  law,  and  its  very  spirit  in  countries  of  Com- 
mon law. 


*  Morris  vs.  Sheriff,  30  La.  ^Vn.  1314. 

Bagley  vs.  Sheriff,  10  Rob.  La.  45. 

Pepper  vs.  Dunlap,  16  La.  103. 
t  Laurent,  Droit  Civil,  Vol.  28,  p.  499,  Sec.  503. 

Troplong,  Nantissement,  Sees.  480,  481. 
t  Bank  vs.  Laird,  2  Wheat.  390. 

Elder  vs.  Rouse,  1.5  Wind.  218. 

Baldwin  vs.  Bradlev,  (39  111.  32. 


CHAPTER  XXIII. 

What  Debt  is  Secured  by  the  Pledge. 

294.  In  the  contract  of  pledge,  as  in  all  contracts, 
it  is  the  consent  of  the  parties,  their  intention  as  to 
the  subject  of  the  agreement,  which  makes  the  con- 
tract. The  pledge,  therefore,  only  secures  the  partic- 
ular debt  of  the  pledgeor  which  he  and  the  pledgee 
together  intend  to  secure.  In  consequence  of  this 
principle,  if  during  the  existence  of  the  pledge,  the 
pledgeor  becomes  indebted  to  the  pledgee  on  some 
other  account,  the  latter  has  no  right  to  retain  the 
securities  after  the  first  debt  is  paid,  or  affect  the  same 
securities  to  the  payment  of  the  new  debt.  This  is 
firmly  established  by  the  Common  law  jurisprudence 
in  the  United  States  and  by  the  Civil  law  jurispru- 
dence of  the  State  of  Louisiana.  In  such  case  the 
pledgee  has  no  lien  or  right  of  retention  originally 
created  by  the  pledge,  left  to  him,  and  his  further 
detention  of  the  security  is  unwarranted  and  unlaw- 
ful. At  the  same  time,  as  it  is  a  matter  of  contract 
between  the  parties,  they  may  agree  that  the  securi- 
ties in  the  hands  of  the  pledgee  will  be  a  continuous 
pledge  ;  that  they  will  secure  any  balance  of  account 
due  by  the  pledgeor ;  that  they  will  secure  future  in- 
debtedness of  the  latter.  In  all  such  stipulations  there 
may  not  be  any  disturbance,  or  removal  and  replace- 


248  The  Law  of  Pledge. 

ment  of  the  pledge  in  the  hands  of  the  pledgee.      The 
a<£reement  suffices.  * 

295.  Again,  the  parties  may  have  contracted  under 
the  dominion  of  certain  tegislaticn  or  certain  custom, 
by  which  the  pledge  is  made  to  secure  other  debts 
than  the  particular  one  for  which  the  pledge  was  first 
given,  such  as  the  case  of  a  balance  of  account  due  a 
banker.  In  all  such  instances,  the  consent  of  the 
pledgeor  to  the  extension  of  the  pledge  is  either  ex- 
pressed or  presumed.  The  statute  in  that  case  is  read 
into  the  contract,  or  the  custom  implied  into  the 
agreement  between  the  pledgeor  and  pledgee.  The 
intention  of  the  contracting  parties  is  then,  in  case  of 
contestation,  either  proved  or  presumed. 

Such  principles  are  common  to  contracts  in  gen- 
eral.f 

296.  The  retention  of  the  pledge  after  payment  of 
the  original  debt,  for  the  purpose  of  securing  a  subse- 
quent debt,  without  the  consent,  expressed  or  implied, 
of  the  pledgeor,  would  be  so  clearly  a   gross  violation 

*  Union  National  Bank  vs.  Siocoinb,  34  La.  An.  927. 

Billet  vs.  Woods,  24  La.  An.  193. 

Marcade,  Explication  of  Code  Napoleon,  Vol.  4,  Xo.  77S. 
t  County  vs.  Huchburger,  46  111.  App.  518. 

Searigtit  vs.  Bank,  Pa.  Sup.,  29  An.  783. 

Bank  vs.  Harris,  26  Md.  An.  523. 

Bank  vs.  Hanson,  51  Neb.  N.  W.  1035. 

Hardie  vs.  Wright,  18  Tex.  S.  W.  615. 

.Tarvis  vs.  Rogers,  15  Mass.  389. 

.Schiffer  vs.  Feagin,  51  Ala.  335. 

Woolley  vs.  Banking  Co.,  81  Kv.  527. 

Loyd  vs.  Bank,  86  Va.  690. 

•Bank  vs.  Loeb,  27  La.  An.  110. 

Burnap  vs.  Bank,  96  N.  Y.  125. 

Adams  vs.  Sturges,  55  111.  468. 

Laloire  vs.  Wiltz,  31  La.  An.  436 

Bank  vs.  AViltz,  31  La.  An.  244. 

.Jones,  on  Fledges,  Sec.  354  et  seq. 


What  Debt  is   ^Secured  by  the  Pledge.  249 

of  the  ng"hts  of  the  latter  that  it  -would  give  rise  to  a 
claim  for  damages  against  the  pledgee.* 

297.  In  France  and  in  the  other  countries  of  con- 
tinental Europe  which  followed  its  legislation  after 
the  promulgation  of  the  Code  Napoleon,  the  rule  is 
different,  and  the  security  in  the  hands  of  the  pledgee 
will  secure  a  subsequent  debt  of  the  pledgeor,  under 
certain  circumstances,  without  any  agreement  or 
understanding  to  that  effect.  The  agreement  or 
understanding,  on  the  contrar}',  would  be  necessary 
to  prevent  it  from  being  so.  The  article  of  the  Code 
Napoleon  which  provides  for  diis  continuing  effect 
of  the  pledge  in  favor  of  the  pledgee  makes  it  a 
condition  of  it  that  the  second  debt  should  be  con- 
tracted posteriorly,  and  be  due  anteriorh*,  to  the  first 
debt.  The  Code  Napoleon  states  that  if  there  existed 
from  the  same  debtor  in  favor  of  the  same  creditor, 
another  debt  contracted  subsequently  to  the  pledge 
and  exigible  before  the  payment  of  the  first  debt,  the 
creditor  would  not  be  obliged  to  surrender  the  pledge 
before  being  fully  paid  the  amount  of  both  debts ^ 
even  if  there  had  been  no  stipulation  to  affect 
the  pledge  to  the  payment  of  the  second  debt.f 
But  the  subtle  reasoning  of  the  Civilians  has 
raised  a  very  nice  and  curious  question  on  this  point. 
The  Code  Napoleon,  as  we  see,  provides  that  if  it 
exists  from  the  same  debtor  to  the  same  creditor 
another   debt  contracted  after  the  pledge  and  exigible 

*  Bank  vs.  Loeb,  27  La.  An.  110. 

Romero  &  Bayard  vs.  Newman,  50  La.  An.  SO. 

.Tarvis  vs.  Rogers,  15  Mass.  389. 

Baldwin  vs.  Bradley,  69  111   32.. 

Jones,  on  Pledges,  Sec.  3.5().  , 

Senecal  vs.  Bauze,  House  of  Lords,  Appeal  cases,  1888-89,  p.  G37. 
t  Code  Napoleon,  Art.  2082. 


250  The  Law  of  Pledge. 

before  the  first  debt,  the  creditor  shall  not  be  obliged 
to  ■part  with  the  secttrity  before  beiiig  fully  paid  both 
debts.  Does  this  mean  that  the  pledgee  has  against 
the  other  creditors  both  the  hen  and  the  right  of  re- 
tention, or  either  of  them  only,  or  neither  of  them  at 
all?  Laurent  is  of  the  opinion  that  the  article  gives 
the  pledgee  no  lien  or  right  of  preference  for  the 
second  debt,  and  he  denounces  the  opposite  doctrine 
as  destructive  of  the  principles  of  the  Code.  Mour- 
lon,  a  more  recent  commentator,  on  the  contrary, 
supports  the  theor\'  that  the  pledgee  has,  by  virtue  of 
the  article,  the  same  lien  for  the  second  debt  that  he 
has  for  the  first.  But  Troplong  is  of  the  opinion 
that  the  right  of  retention  to  secure  the  second  debt 
can  not  affect  the  other  creditors  of  the  pledgeor.* 

298.  This  feature  of  the  French  and  modern  Civil 
law  is  taken  from  the  Roman  law,  as  established  by 
an  edict  of  Emperor  Gordian.  But  the  Roman  law 
went  even  farther  than  the  French  law,  which  in  that 
respect  did  not  follow  its  guide  to  the  end.  The 
edict  of  Gordian  orranted  the  right  of  retention  to  the 
pledgee  without  regard  to  the  origin  of  the  second 
debt,  and  whether  it  was  contracted  after  or  before 
the  pledge.  The  reason  giv'en  for  such  a  rule  is  that 
the  pledgeor,  still  owing  the  second  debt,  could  not, 
without  bad  faith,  demand  the  return  of  the  pledge. 
Propter  exceptionem  doli  niali,  says  Gordian.      Cujas, 


*  Laurent,  Droit  Civil,  Vol.  28,  Sec.  .508. 
Mourlon,  Examen  Critique,  No.  227. 
Troplong,  Nantissement,  Sec.  4G1. 
<„^ode  Napoleon,  Art.  2082. 


What  Debt   is   yECUEED  by  the  Pledge.  251 

the  great  oracle  of  French  jurisprudence  of  the  six- 
teenth century,  adopted  this  doctrine  and  joined  in 
words  of  severe  condemnation  of  the  pledgeor  who 
would  have  his  property  returned  to  him  under  such 
circumstances.'^ 

The  reason  of  the  French  law  is  given  in  the  report 
of  the  discussions  of  the  framers  of  the  Code  Napoleon. 
That  reason  is  principally  based  upon  the  presuniptio)! 
that  the  pledgee  consented  to  the  second  debt  on  con- 
dition that  it  would  be  secured  b}'  the  pledge,  and  that 
the  pledgeor  agreed  to  it.  This  is  why  a  debt  of  the 
pledgeor  contracted  before  the  pledge  does  not  enter 
into  the  provision  of  the  law.  And  again,  the  second 
debt  must  be  exigible  before  the  payment  of  the  first, 
because  the  parties  are  also  presumed  to  have  con- 
tracted in  view  of  the  return  of  the  pledge  on  payment 
of  the  debt  first  contracted.  The  law  is,  therefore, 
based  upon  the  presumed  consent  of  both  parties  that 
the  pledge  should  secure  the  second  debt ;  which  is 
the  fundamental  principle  governing  all  contracts.  So 
much  so,  that  the  parties  may,  by  agreement,  provide 
differently,  and  stipulate  that  the  second  debt  shall  not 
be  secured  by  the  pledge.  In  default  of  such  stipula- 
tion, they  contract  under  the  dominium  of  the  article 
of  the  Code,  which,  in  case  of  their  silence,  is  read 
into  the  contract. f 


*  Code  of  Justinian,  Vol.  3,  Title  XXVIL 

Troplong,  Xantissement,  Sec.  462. 

/d.,  Des  Hypotheques,  Vol.  1,  Sec.  250. 

Grenier,  Des  Hypotheques,  Vol.  1.  Sees.  298,  314. 
t  Laurent,  Droit  Civil,  Sees.  504,  505. 


CHAPTER  XXIV. 

The  Pledgee  Can  Not,  Even  by  Previous  Agree- 
ment, Appropriate  the  Pledge  to  Himself. 

299.  It  is  a  fundamental  principle  of  the  Civil  law, 
well  established  in  the  old  Roman  jurisprudence  and 
introduced  in  the  modern  legislation  of  Continental 
Europe,  that  no  agreement  between  pledgeor  and 
pledgee,  by  which  the  latter  would,  for  non-payment 
of  the  debt,  become  the  owner  of  the  thing  pledged, 
is  valid  and  enforceable  in  law.  The  forbidding  pro- 
vision is  found  in  Art,  2078  of  the  Code  Napoleon, 
and  in  Art.  3165  of  the  Civil  Code  of  Louisiana. 

The  clause  in  question,  which  the  French  law 
writers  speak  of  as  the  pacte  co'niniissoire  of  the 
Rom-ans,  is  commented  upon  b}-  them  with  great 
severity.  Troplong  says  of  it:  "This  pact  is  marked 
by  excessive  harshness.  Almost  ever  the  thing  given 
in  pledge  is  of  superior  value  to  the  debt,  and  it  is 
only  in  yielding  to  the  moral  constraint  of  necessity 
that  the  debtor  consents  to  submit  to  the  rigorous 
obligation  of  abandoning  to  the  creditor  that  thing 
which  is  worth  more  than  he  owes.  Such  a  clause  is 
immoral :  contra  bonos  mores.  It  is  oppressive  ;  it  is 
the  abuse  of  the  strong  party  over  the  weak  one ;  it 
is  an  odious  speculation  by  the  person  who  has  money 
over  the  one  who  needs  it.''  * 


*  Troplong,  Nantissement,  Sec.  379. 

253 


254  The  Law  of  Pledge. 

300.  It  was  known  in  the  Roman  law  as  the  lex 
co7nmissoria.  That  was  the  pact  or  clause  inserted  in 
the  contract  of  pledge,  by  virtue  of  which  the  thing 
pledged,  in  case  of  non-payment  by  the  debtor, 
became  the  property  of  the  pledgee.  Constantine 
prohibited  it  when  he  contrived  with  great  solicitude 
to  improve  the  morals  of  tiis  people,  considering  this 
stipulation  in  the  pledge  as  cojitra  boiios  mores, 
because  it  facilitated  usury  and  placed  the  borrower 
at  the  mercy  of  the  creditor.  This  prohibition  has 
been  introduced  generally  into  the  countries  of  modern 
Civil  law.  The  Code  Napoleon  provides  for  It  in 
these  terms:  "The  creditor  can  not,  in  default  of 
payment,  dispose  of  the  pledge  ;  reserving  to  him  to 
have  it  ordered  by  the  Court  that  the  thing  will  remain 
with  him  in  payment  and  up  to  the  amount  of  the 
debt,  by  an  appraisement  made  by  experts  ;  or  that 
it  will  be  sold  at  public  auction. 

"Any  clause  which  would  authorize  the  creditor  to 
appropriate  the  pledge  to  himself,  or  to  dispose  of  it 
without  the  aforesaid  formalities,  is  null." 

The  countries  of  Continental  Europe  have  adopted 
the  same  rule  of  prohibition."^ 

301.  As  to  the  State  of  Louisiana,  it  may  now  be 
doubtful  whether  the  clause  in  question  is  still  for- 
bidden  by   its   statute.      The   prohibitive  article  of  its 


*  Code  Napoleon,  Art.  207S. 
Pothier,  Nantissement,  Sec.  18. 
Troplong,  Nantissement,  See.  377  et  seq. 
De  St.  Joseph,  Concordance  des  Codes  Civiles,  p.  109.  showing 

uniformity  of  the  taw  of  Continental  Europe  on  this  point. 
Merlin.  Repertoire,  verbo  Gage. 


Pledgee  Can  Not  Appropriate  the  Pledge.       255 

Civil  Code,  enacted  in  the  year  1870^  is  in  the  same 
words  as  that  of  the  Napoleon  Code  from  which  it 
was  taken.  The  last  parao^raph  of  the  article  reads 
thus:  "Any  clause  which  should  authorize  the 
creditor  to  appropriate  the  pledge  to  himself,  or  dis- 
pose thereof  without  the  aforesaid  formalities,  shall  be 
null." 

But^  in  1872,  a  law  was  passed,  amending  the 
article  in  these  terms  :  "  But  in  all  pledges  of  movable 
property,  or  rights,  or  credits,  stocks,  bonds,  or  other 
movable  property,  it  shall  be  lawful  for  the  pledger  to 
authorize  the  sale  or  other  disposition  of  the  property 
pledged^  in  such  manner  as  may  be  agreed  upon  by 
the  parties,  without  the  intervention  of  the  courts  of 
justice ;  -provided^  that  all  existing  pledges  shall 
remain  in  force  and  be  subject  to  the  provisions  of 
this  act."* 

Under  the  provisions  of  this  law,  it  is  the  common 
practice  now  in  Louisiana,  to  stipulate  in  all  acts  of 
pledge  that  the  pledgee  shall  have  the  right,  in  case 
of  non-payment,  to  sell  the  pledge  at  public  or  pri- 
vate sale,  with  or  without  notice,  to  buy  it  in,  and  so 
forth.  The  validity  of  such  stipulations  has  never 
been  doubted.  But  could  the  pledgee,  by  virtue 
of  the  law  which  makes  it  lawful  for  the  pledgeor 
to  authorize  the  sale  or  other  disposition  of  the 
thing  pledged,  stipulate  that  it  shall  become  his  prop- 
erty without  sale  and  without  appraisement,  though 
its  value  vi\,\y  be  greater  than  the  amount  of  the  debt, 

*  Civil  Code  of  Louisiana,  Art.  31G5. 
Acts  of  the  Legislature  of  Louisiana  of  1872,  p.  3G. 


266  The  Law  of  Pledge. 

as  is  ordinarily  the  case?  This  question  has  yet  to  be 
answered.  It  is  likely  to  be  answered  in  the  negative. 
The  prohibition  contained  in  the  article  of  the  Civil 
Code  of  Louisiana  is  one  of  public  order,  as  we  have 
seen.  The  Act  of  1872  can  not  be  presumed  to  have 
been  leveled  at  it,  in  providing  that  it  shall  be  lawful 
for  the  pledgeor  to  authorize  the  sale  or  other  dis- 
position of  the  property  pledged  in  such  manner  as 
may  be  agreed  upon  by  the  parties  without  the  inter- 
vention of  courts  of  justice.  Such  an  indirect  and 
implied  re-establishment  of  the  obnoxious  pact  or 
lex  commissoria  would  be  against  all  the  rules  of 
legislation. 

302.  The  Common  law  has  adopted  from  the  Civil 
law  the  wise  and  humane  principles  of  the  edict  of 
Constantine  prohibiting  the  lex  commissoria,  the  stipu- 
lation in  the  contract  of  pledge  by  which,  in  default 
of  payment,  the  thing  pledged  shall  become  ipso 
facto  'the  property  of  the  pledgee,  and  that  the 
pledgeor  shall  not  have  the   right  to  redeem. 

In  this  respect,  the  two  systems  seem  to  be  on  a 
par.  Judge  Story  says:  "  If  a  clause  is  inserted  in 
the  original  contract  providing  that,  if  the  terms  of 
the  contract  are  not  strictly  fulfilled  at  the  time 
and  in  the  mode  prescribed,  the  pledge  shall  be  irre- 
deemable, it  will  be  of  no  avail.  For  the  Common 
law  deems  such  a  stipulation  unconscionable  and  void 
upon  the  ground  of  public  policy,  as  tending  to  the 
oppression  of  debtors. "^^ 

*  Story,  on  Bailments,  Sec.  345. 


Pledgee  Can  Not  Appropriate  the  Pledge.      257 

Chancellor  Kent  expresses  the  same  views  and  says  : 
■"  Every  agreement  preventing  the  right  of  redemption 
in  mortgage  of  chattels,  as  of  lands,  w^ould  no  doubt 
be  equally  condemned  in  the  English  law."  He  says 
so  in  speaking  of  the  contract  of  pledge  and  of  the 
abolishment  of  the  lex  commissoria  by  Constantine.  '^ 

Mr.  Jones  is  more  positive  in  his  opinion  on  the 
subject,  and  expresses  it  authoritatively  in  these 
words:  "A  right  of  redemption  attaches  to  every 
pledge.  This  right  is  a  part  of  the  contract,  whether 
it  be  express  or  implied,  and  the  parties  can  make  no 
valid  agreement  that  there  shall  be  no  redemption 
after  default.  '  Once  a  mortgage  always  a  mort- 
gage,' is  one  of  the  most  important  maxims  in  the 
law  of  mortgages.  With  a  change  of  terms  it  is 
equall}'  applicable  in  the  law  of  pledges.  '  The  right 
of  redemption  attaches  equally  to  both^  and  it  is  as 
difficult  to  transmute  the  one  as  the  other  into  a  sale 
by  the  operation  of  the  original  contract.  Though 
anciently  at  Rome  the  creditor  and  debtor  were  per- 
mitted by  the  lex  commissoria  to  make  an  agreement 
at  the  date  of  the  pledge  whereby  it  would,  on  a  pre- 
scribed contingency,  become  the  absolute  property  of 
the  pawnee ;  such  a  power  was  not  indulged,  even  at 
Rome,  since  the  days  of  Constantine^  who  abolished 
the  law  by  which  it  had  been  sanctioned.  Every 
agreement  for  preventing  redemption  of  pawns  is 
proscribed  by  the  Common  law  as  emphatically  as 
are  similar  aj^reements  in  mortora2res  of  real  estate.' 


*  Kent,  Comm.,  Vol.  2,  Sec.  5S3. 


258  The  Law  of  Pledge. 

Therefore,  if  in  a,  written  or  verbal  contract  of  pledge 
it  is  stipulated  that  the  property  shall  be  absolutely 
the  property  of  the  pledgee  if  the  debt  be  not  paid 
at  a  time  stipulated,  the  right  to  redeem  exists  not- 
withstanding the  agreement  of  the  parties.  The  law 
recognizes  no  agreement  to  prevent  a  redemption  of 
the  pledge.  Any  contract  which  is  a  pledge  in  the 
beginning  continues  a  pledge  until  the  debt  is  paid, 
or  the  right  of  redemption  is  foreclosed.''* 

303.  It  is  to  be  observed,  however,  that  both  by 
the  Civil  and  the  Common  law,  the  pledgeor  can  val- 
idly agree  after  the  debt  has  become  due^  that  the 
pledgee  may   keep  the  property  as  his  own  in   pay- 

'  ment  of  the  debt.  The  transfer  of  property  in  such 
cases  takes  place  by  virtue  of  an  agreement  subsequent 
to  and  independent  of  the  original  contract  of  pledge. 
The  debtor  is  then  no  longer  under  the  pressure  of 
necessity  and  constrained  to  submit  to  the  exacting 
conditions  of  the  creditor  in  apph'ing  for  a  loan  of 
monc}'.  He  is  acting  freely  and  presumed  to  be  mak- 
ing no  sacrifice  of  his  property. f 

304.  The  doctrine  established  by  the  abolishment 
of  the  lex  coiiimissoria  of  the  Roman  law,  and  by 
the  prohibition  of  the  modern  Civil  law  of  any  agree- 
ment in  the  contract  of  pledge  by  which,  in  default  of 
payment,  the  pledge  would  become  the  property  of 
the  pledgee,  has  been  declared  to  be  part  of  the  Com- 

*  Jones,  on  Pledge?.  See.  553. 

t  Troplong,  Xantissenient.  Sec.  403. 

Laurent,  Vol.  28.  Sec.  520. 

Story,  Bailments,  Sec.  345. 

Jones,  on  Pledges,  Sec.  555. 


Pledgee  Can  Not  Appropriate  the  Pledge.       259 

mon  law,  in  the  same  manner,  on  the  same  princi- 
ples and  for  the  same  reasons.  The  Supreme  Court 
of  the  United  States  has  said  on  this  subject:  "  It  is 
also  an  established  doctrine  that  an  equity  of  redemp- 
tion is  inseparably  connected  with  a  mortgage  ;  that  is 
to  say,  so  long  as  the  instrument  is  one  of  security, 
the  borrower  has,  in  a  court  of  equity,  a  right  to 
redeem  the  property  upon  payment  of  the  loan.  This 
right  can  not  be  waived  or  abandoned  by  any  stipula- 
tion of  the  parties  made  at  the  time,  even  if  embodied 
in  the  mortofasfe.  This  is  a  doctrine  from  which  a 
court  of  equity  never  deviates.  Its  maintenance  is 
deemed  essential  to  the  protection  of  the  debtor,  who, 
under  pressing  necessities,  will  often  submit  to  ruinous 
conditions,  expecting  or  hoping  to  be  able  to  repay 
the  loan  at  its  maturity,  and  thus  prevent  the  condi- 
tions from  being  enforced  and  the  property  sacri- 
ficed." 

305.  The  Court  in  the  same  case  recognized  also 
the  corollary  of  the  rule,  which  is  that  the  debtor  may, 
by  a  subsequent  transaction,  under  certain  circum- 
stances and  for  a  proper  consideration,  transfer  the 
property  to  the  creditor  in  payment  of  the  debt.  The 
Court  said  on  this  point : 

"A  subsequent  release  of  the  equity  of  redemption 
may  undoubtedly  be  made  to  the  mortgagee.  There 
is  nothing  in  the  policy  of  the  law  which  forbids  the 
transfer  to  him  of  the  debtor's  interest.  The  transac- 
tion will,  however,  be  closely  scrutinized,  so  as  to 
prevent   any  oppression  of  the  debtor.      Especially  is 


260  The  Law  of  Pledge. 

this  necessar}',  as  was  said  on  one  occasion  by  this 
Court,  when  the  creditor  had  shown  himself  read}' 
and  skilful  to  take  advantage  of  the  necessities  of  the 
borrower  (^Russell  vs.  Southard,,  supra).  Without 
citing  the  authorities,  it  may  be  stated  as  conclusions 
from  them  that  a  release  to  the  mortgagee  will  not  be 
inferred  from  equivocal  circumstances  and  loose  ex- 
pressions. It  must  appear  bv  a  writing  importing  in 
terms  a  transfer  of  the  mortgagor's  interest,  or  such 
facts  must  be  shown  as  will  operate  to  estop  him  from 
asserting  any  interest  in  the  premises.  The  release 
must  also  be  for  an  adequate  consideration  ;  that  is  to 
say,  it  must  be  for  a  consideration  which  would  be 
deemed  reasonable  if  the  transaction  were  between 
other  parties  dealing  in  similar  property  in  its  vicinity. 
Any  marked  undervaluation  of  the  property  in  the 
price  paid  will  vitiate  the  proceeding."  * 

This  doctrine  is  carried  so  far  that  the  subsequent 
release  by  the  mortgagor  of  his  equity  of  redemption 
is  always  looked  upon  with  suspicion  by  the  courts,  f 


*  Peugh  vs.  Davis,  9t}  U.  S.  337. 

Russell  vs.  Southard,  12  How.  l.SO. 
t  Pritchard  vs.  Elton,  38  Conu.  434. 

Jones,  on  Mortija^es.  Vol.  1,  Sec.  ' 


CHAPTER  XXV. 

Right  of  the  Pledgee  to  Cause  the  Pledge  to 
BE  Sold,  or  to  Sell  it  Himself. 

306.  The  ultimate  object  and  purpose  of  the  con- 
tract of  pledge  are  that,  in  default  of  payment  by  the 
pledgeor,  the  thing  pledged  should  be  sold  to  pay  the 
creditor.  The  sale  is  necessary  because,  by  default 
of  payment  or  redemption,  the  pledge  does  not 
become  the  property  of  the  pledgee.  He  has  only  a 
lien  on  it.  There  must  be  a  foreclosure  of  the  pledge 
to  pass  the  ownership  of  the  thing,  either  to  the 
pledgee  himself  or  to  any  other  purchaser. 

When  and  where  legislation  does  not  prescribe  the 
mode  of  sale,  the  parties  may,  by  their  agreement,  tix 
the  manner,  terms  and  conditions  of  the  sale. 

In  France  and  in  the  Civil  law  countries  of  Conti- 
nental Europe,  which  have  followed  the  legislation  of 
the  Napoleon  Code,  the  foreclosure  of  the  pledge 
must  be  by  judicial  sale,  and  it  must  be  preceded  by 
a  judgment  in  favor  of  the  pledgee.  But  the  pledgee 
is  not  compelled,  in  proceeding  against  the  pledgeor, 
to  demand  the  sale ;  he  may  choose  to  demand  that 
the  pledge  should  become  his  property  by  decree  of 
Court,  on  an  appraisement  made  by  experts  appointed 
by  the  judge,  the  surplus  value,  if  any,  in  that  case  to 
be  paid  by  the  pledgee  to  the  pledgeor.'^ 

*  Napoleon   Code.  Art.  2678. 
Troplong,  Nantisseuient,  Sec.  400. 

261 


2G2  The  Law  of  Pledge. 

Such  is  the  law  of  those  countries  for  the  pledge 
securing  ordinary  obligations,  outside  of  commercial 
transactions.  But  for  the  sale  or  foreclosure  of  com- 
mercial pledges  it  is  not  necessary  for  the  pledgee  to 
proceed  by  suit  and  judgment  against  the  pledgeor. 
The  codes  of  commerce  of  those  countries  provide  for 
a  speedy  sale  of  the  securities  without  judicial  pro- 
ceeding. This  will  be  the  subject  of  a  subsequent 
chapter. 

307.  In  the  State  of  Louisiana  the  parties  may 
agree  in  the  act  or  deed  of  pledge  that  the  creditor 
on  default  of  payment  shall  have  the  right  to  sell  the 
pledge,  or  cause  it  to  be  sold,  at  private  or  public 
sale,  with  or  without  notice  to  the  pledgeor ;  that  the 
pledgee  may  be,  for  that  purpose  and  to  that  effect, 
appointed  by  the  pledgeor  his  agent  to  sell,  and  that 
the  pledgee  may  himself  buy  the  pledge  for  his  own 
account.  The  orreatest  latitude  is  ^iven  to  the  riorht  of 
the  parties  to  fix  their  own  terms  of  the  agreement.  In 
that  case,  as  we  said  before,  the  power  of  attorney 
given  the  pledgee,  being  coupled  with  an  interest,  is 
not  revocable.  It  is  that  of  the  procAirator  in  rem 
suamJ^ 

308.  Mr.  Jones,  in  his  book  on  Pledges,  has  com- 
mitted a  great  mistake  in  saying  that,  in  Louisiana, 
the  pledgee  is  compelled  to  obtain  judgment  against 
the  pledgeor  before  selling  the  pledge,  and  that  then 
it  must  be  sold  as  in  cases  and  with  the  formalities  of 
judicial  sales,  f 

*  Kenshaw  vs.  Creditors,  40  La.  An.  37. 
t  Jones,  on  Pledges,  Sec.  G21. 


Right  of  Pledgee  to  Sell  Pledge.  263 

Such  was  the  law  in  that  State  b}^  the  Civil  Code 
of  the  year  1870,  cited  by  that  distinguished  writer. 
And  this  shows  the  danger  of  stating  in  treatises  the 
statutory  law  of  a  State  without  verification  of  the 
latest  amendments.  The  book  of  Mr.  Jones  was  pub- 
lished in  1883.  The  article  of  the  Louisiana  Civil 
Code  1870,  cited  by  him,  was  amended  in  1872  by  an 
act  of  the  Legislature  making  it ' '  lawful  for  the  pledgeor 
to  authorize  the  sale  or  other  disposition  of  the  prop- 
erty pledged,  in  such  manner  as  may  be  agreed  upon 
by  the  parties  without  the  intervention  of  courts  of 
justice."  *  It  is  the  common  practice  now  in  Louisi- 
ana for  the  pledgee  to  sell  the  pledge,  under  the  pro- 
visions of  the  law  of  1872,  without  having  recourse  to 
the  courts  and  without  getting  a  judgment  against  the 
pledgeor.  f 

309.  Mr.  Edwards,  in  the  third  edition  of  his 
treatise  on  Bailments,  published  in  1893,  commits  the 
same  error  and  states  that,  in  Louisiana,  "  the  pawnee 
can  not,  on  failure  of  payment,  dispose  of  the  pledge  ; 
but  must  apply  to  a  judge  to  order  that  the  thing  shall 
remain  to  him  in  payment  for  as  much  as  it  shall  be 
valued  at  by  two  appraisers,  or  that  it  shall  be  sold  at 
public  auction,  at  the  choice  of  the  debtor;  and  ever)- 
agreement  authorizing  the  creditor  to  appropriate  the 
pledge  to  himself,  or  to  dispose  of  it  without  such  for- 
malities, is  void.  In  the  other  States,  where  the 
Common  law  prevails,  the  pawnee  is  allowed  to  sell 
at  his  discretion,  being  held  responsible,  at  his  peril, 

*  Acts  of  Legislature  of  Louisiana  of  1872,  p.  36. 
t  Union  Bank  vs.  Forsyth,  So.  Rep.,  Vol.  23,  p.  917. 


264  The  Law  of  Pledge. 

to  deal  fairly  and  justl}^  with  the  pledge.  The  differ- 
ence between  the  Civil  and  the  Common  law  in  this 
respect  is  modal ;  it  barely  touches  the  essential 
rights  of  the  parties  under  the  contract.  The  Civil 
law  assumes  the  direction  of  the  proceeding,  working 
a  foreclosure  ;  and  the  Common  law  gives  a  remedy' 
for  any  violation  of  its  principles,  in  a  like  proceed- 
mg.     ^ 

Mr.  Edwards,  in  this  statement  of  the  law  of  Lou- 
isana,  is  guilty  of  a  double  mistake.  First,  he  cites, 
and  we  might  say  quotes,  an  article  of  the  Civil  Code 
of  that  State,  promulgated  in  the  year  1825,  and 
which  was  superseded  bv  the  Revised  Civil  Code  of 
1870.  In  the  law  of  1870,  the  pledgee  could  not 
demand  that  the  thing  pledged  should  remain  to  him 
in  payment  for  as  much  as  it  should  be  valued  at  by 
two  appraisers  ;  but  was  limited  to  the  right  of  demand- 
ing that  the  thing  be  sold  at  public  auction.  The  law 
of  1870  itself  was  amended,  as  we  have  just  shown, 
by  a  statute  of  1872,  which  puts  the  law  of  Louisiana 
on  this  point  upon  the  same  level  as  the  statutory  law 
of  most  of  the  States  of  the  Union,  to-wit :  That  the 
parties  in  the  contract  of  pledge  may  stipulate  that  the 
thing  pledged  may,  on  default  of  payment,  be  sold  or 
disposed  of  in  any  manner  and  on  any  terms  chosen 
by  themselves.  It  is  true  that  the  Civil  law  prevails 
in  Louisiana  in  what  concerns  persons,  things,  suc- 
cessions, donations,  conventions,  obligations  or  con- 
tracts, privileges,   mortgages  and   prescriptions.     But 

*  Edwards,  on  Bailments,  Sec.  280. 


Right  of  Pledgee  to  Sell  Pledge.  205 

its  Commercial  law  is  substantially  the  same  as  the 
Common  law  of  England,  as  adopted  in  this  countiy, 
and  is  mostly  unwritten  and  established  by  custom. 
And  in  its  law  of  pledge,  in  particular,  at  the  same 
time  that  it  has  retained  the  most  important  and  con- 
servative provisions  of  the  Civil  law,  it  has  set  aside  all 
such  restrictions  as  could  impede  the  course  and  prog- 
ress of  commercial  transactions. 

Such  unguarded  statements  of  the  statutory  law  of 
a  State  as  are  made  by  both  Mr.  Jones  and  Mr. 
Edwards  necessarily  lead  their  readers  into  fatal  errors, 
and  are  a  blemish  upon  their  works,  the  more  to  be 
regretted  that  these  writers  have  displayed  in  their 
books  considerable  learning  and  taken  very  great 
pains  in  the  discussion  and  exposition  of  their  subject. 

310.  At  Common  law,  and  in  the  absence  of  an 
agreement  of  the  parties  for  a  private  sale,  where 
such  an  agreement  is  permissible,  the  modern  rule  is 
that,  on  default  of  payment,  the  pledgee  has  the  right 
to  cause  the  pledge  to  be  sold  at  public  auction,  with- 
out judicial  process  or  decree,  after  giving  the  pledgeor 
proper  and  reasonable  notice  of  the  intended  sale. 
This  right  of  the  pledgee  to  sell  is  inherent  in  him, 
as  the  same  right  to  foreclose  the  mortgage  is  inhe- 
rent in  the  mortgagee.  The  law  will  presume  that  such 
was  the  understanding  of  the  parties  at  the  time  of  the 
formation  of  the  contract  of  pledge,  in  default  of  an 
express  agreement.* 


Am.  and   Eng.  Ency.  of  Law,  A^ol.  18,  p.  668. 
Jerome  vs.  McCarter,  94  U.  S.  734. 


CHAPTER  XXVI. 

Right  of  the    Pledgee  to    Buy   the    Pledge  at 
Pdblic  or  Private  Sale. 

311.  The  pledgee  ma}-  be  the  purchaser  of  the 
thing  pledged,  either  at  public  or  private  sale.  If  the 
sale  is  made  by  order  of  Court,  at  public  auction,  by 
foreclosure  of  the  pledge,  the  pledgee  has  the  same 
right  to  bid  and  buy  in  the  pledge  as  the  mortgagee, 
in  the  same  circumstances,  has  the  right  to  bid  and 
buy  in  the  mortgaged  property.  In  such  judicial 
sales  the  Court  is  the  vendor.  If  the  pledge  is  sold 
at  private  sale  the  pledgeor  is  the  vendor.  In  that 
case,  for  the  purpose  of  effecting  the  sale,  he  may  em- 
ploy an  agent,  and  he  may^  in  the  act  of  pledge,  ap- 
point the  pledgee  himself  his  agent  to  sell  on  default 
of  payment.  Such  is  now  the  custom  in  the  United 
States  in  commercial  transactions  of  pledge ;  the 
pledgeor  constitutes  and  appoints  the  pledgee  his  agent 
for  the  purpose  of  selling  the  pledge  if  the  debt  is  not 
paid  at  maturity  ;  and,  in  many  acts  or  deeds  of  pledge, 
it  is  specially  provided  that  the  pledgee  shall  have  the 
right  to  buy  the  securities  himself,  at  the  market  rate, 
even  at  private  sale.  In  that  case  we  have  the  anom- 
alous fact  of  one  person  acting  in  the  double  capacity 
of  vendor  and  vendee.  There  is,  therefore,  in  the 
transaction  apparently  no  union  of  two  minds,  no 
aggregatio  uientijuii,  necessary'  to  form  a  contract. 
But  the   sale  and  purchase   in   that  case  are  only  the 


268  The  Law  of  Pledge. 

execution  of  the  contract  of  pledge,  in  which  the 
minds  of  the  contracting  parties  have  met  before. 
The  subsequent  fact  of  the  sale  has  been  anticipated 
i«  that  contract  and  the  terms  and  conditions  of  the 
sale  have  been  agreed  upon  and  fixed  in  advance. 
The  contract  of  pledge  then  is,  at  the  same  time,  a 
contract  of  conditional  sale. 

312.  When  the  pledgee  is  the  agent  of  the  pledgeor 
to  sell,  he  comes  clearly  under  the  rule  that  the  agent 
appointed  to  sell-  can  not  purchase  the  propert}'  of 
his  principal,  without  the  latter' s  consent.  To  enable 
the  pledgee,  therefore,  to  become  himself  the  pur- 
chaser of  the  securities,  at  public  or  private  sale,  it  is 
necessary  that  the  pledgeor  should  have  consented  to 
it.  When  tlie  pledgee  has,  in  the  act  of  pledge, 
stipulated  for  the  right  to  buy  the  pledge,  even  if  it  is 
sold  by  himself,  there  is  no  question  that  such  agree- 
ment is  valid  and  binding  upon  the  pledgeor.* 

313.  When  the  sale  is  made  through  an  agent  of 
the  pledgeor,  appointed  in  the  act  of  pledge  as  the 
agent  of  both  parties,  the  objection  may  be  raised 
that  the  same  person  can  not  be  the  agent  of  parties 
having  a  conflicting  interest.  The  biblical  precept 
may  be  quoted  in  that  case,  that  no  one  should  serve 
two  masters  at  the  same  time.  Under  that  rule  it 
has  been  held  that  the  vendor  and  the    purchaser  can 


*  Mechem,  on  Agency,  Sees.  461.  4156. 
Wharton,  Agency,  Sees.  232,  235. 
Marsh  vs.  Whitniore,  21  Wall.  178. 
Bain  vs.  Brown,  .56  X.  Y.  285. 
Tewsbury  vs.  Sprirance,  75  111.  187. 
Am.  and  Eng.  Ency.  of  Law,  Vol.  1,  pp.  375-6. 


Right  of  the  Pledgee  to  Buy  the  Pledge.       269 

not  be  represented  by  the  same  agent,  nor  the  insurer 
and  the  insured,  nor  the  co-heirs  in  a  partition  suit  or 
licitation. 

But  the  objection  to  the  same  agent  for  two  princi- 
pals having  conflicting  interests  only  exists  when  they 
do  not  know  that  they  have  the  same  agent.  If  they 
appoint  the  agent  jointly,  knowingly  and  for  purposes 
of  their  own,  neither  of  them  can  afterward  complain 
of  the  joint  or  double  agency,  nor  of  the  acts  of  the 
common  agent  legall}^  done.* 


*  Mecheni,  Agency,  Sec.  67. 
Rice  vs.  Wood,  113  Mass.  133. 
Fitzsimmons  vs.  Exp.  Co.,  40  Ga.  330. 
Joslin  vs.  Cowee,  56  N.  Y.  626. 
Robinson  vs.  Jarvis,  25  Mo.  App.  421. 


CHAPTER  XXVII. 
Commercial   Pledges. 

314.  Properly  speaking  there  is  no  specific  commer- 
cial pledge  either  in  the  Civil  or  in  the  Common  law. 
The  Common  law  makes  no  distinction  between  the 
pledge  of  commercial  effects  and  that  of  any  other  kind 
of  property,  or  between  the  pledge  securing  a  com- 
mercial transaction  and  the  pledge  securing  a  non- 
commercial transaction  ;  and  the  commercial  pledge 
is  no  part  of  the  Civil  law.  But,  in  some  countries  of 
the  Civil  law  there  are  statutes  providing  for  the  spe- 
cial government  of  commercial  pledges,  as  contradis- 
tinguished from  other  and  ordinary  pledges. 

The  general  rule  is  that  in  the  pledge,  as  well  as  in 
the  discount  or  purchase  of  negotiable  paper,  the  law 
merchant  prevails  in  countries  of  either  the  Common 
or  the  Civil  law.  Both  systems  yield  to  it  in  that 
respect.  The  necessities  of  commerce,  which  are 
the  necessities  of  the  world,  demand  it.  The  impor- 
tance of  commerce  is  such  at  the  present  time  in  the 
civilized  world,  and  it  is  so  necessary  that  the  com- 
mercial relations  of  the  different  countries  should  be 
governed  by  the  same  rules,  that  the  law  merchant 
may  be  considered  as  part  of  the  law  of  nations. 

315.  In  France  and  in  Louisiana  the  commercial 
law  governs  the  pledge  of  negotiable  and  quasi-nego- 
tiable paper  by  virtue  of  special  statutes.  The  Code 
Napoleon,    after  establishing  very  precisely  the  rules 


272  The  Law  of  Pledge. 

which  govern  the  contract  of  pledge,  enacts  that  "  the 
above  provisions  are  not  apphcable  either  to  com- 
mercial matters  or  to  Ucensed  pawnbrokers,  estab- 
Hshments,  in  regard  lo  which  the  laws  and  regulations 
relative  to  them  should  be  observed."* 

316.  In  Louisiana,  a  statute,  now  incorporated  in 
the  Civil  Code,  provides  that:  *'When  a  debtor 
wishes  to  pawn  promissory  notes,  bills  of  exchange, 
stocks,  obligations  or  claims  upon  other  persons,  he 
shall  deliver  to  the  creditor  the  notes,  bills  of 
exchange,  certificates  of  stock  or  other  evidences  of 
the  claims  or  rights  so  pawned ;  and  such  pawn  so 
made,  without  further  formalities,  shall  be  valid  as 
well  against  third  persons  as  against  the  pledgeors 
thereof,  if  made  in  good  faith. 

"  All  pledges  of  movable  property  may  be  made 
by  private  writing,  accompanied  b}-  actual  delivery ; 
and  the  delivery  of  property  on  deposit  in  a  ware- 
house shall  pass  by  the  private  assignment  of  the 
warehouse  receipt,  so  as  to  authorize  the  owner  to 
pledge  such  property ;  and  such  pledge  so  made, 
without  further  formalities,  shall  be  valid  as  well 
against  third  persons  as  against  the  pledgeors  thereof, 
if  made  in  good  faith. 

*'  If  a  credit  not  negotiable  be  given  in  pledge, 
notice  of  the  same  must  be  given  to  the  debtor. "f 

317.  The  requirement  of  the  Civil  law  that  an  act 
of  pledge  in  writing,  stating  the  amount  of  the  debt 
and  describing  the  thing  pledged,  should  be  passed 

*  Code  Xapoleon.  Art.  2084. 

t  Civil  Code  of  Louisiana,  Art.  iU'tS. 


Commercial  Pledges.  273 

between  the  parties,  is  therefore  not  necessary  for  the 
pledge  of  negotiable  paper  or  other  commercial  secu- 
rities. Simple  delivery  and  possession  are  sufficient, 
as  in  the  Common  law  pledge.  But  it  is  well  to 
observe  that,  as  the  pledgee  can  not  sell  or  cause  the 
pledge  to  be  sold  at  private  sale  without  the  consent 
of  the  pledgeor,  the  written  act  of  pledge  is  necessary, 
after  all,  even  for  commercial  pledges,  for  the  pur- 
pose of  showing  the  consent  of  the  pledgeor  for  the 
sale,  the  terms  and  conditions  thereof,  and  so  forth. 

The    Pledgee   of  Negotiable    Paper   a    Holder 

FOR  Value 

318.  As  partly  under  statutory  law  and  partly  by 
the  Common  law,  it  is  the  law  merchant  which  gov- 
erns the  pledge  of  negotiable  paper,  it  follows  that  in 
the  pledge,  as  in  the  discount  or  purchase  of  such 
paper,  the  pledgee  is  in  the  position  of  a  holder  for 
value  when  the  pledge  consists  in  negotiable  paper, 
unmatured  and  taken  on  pledge  by  the  pledgee  with- 
out notice  of  any  equities  and  for  a  valuable  cansider- 
ation.  The  principle  of  the  French  law,  that  the 
possession  of  personal  propert}'  is  equivalent  to  title, 
because  such  property  has  no  following,  applies  here 
to  the  contract  of  pledge  as  part  of  the  law  merchant. 
The  true  owner,  therefore,  has  no  claim  against  the 
pledgee  as  holder  for  value,  even  when  the  property 
has  been  misappropriated,  or  purloined  by  an  unfaith- 
ful agent.  * 

*  Tucker  vs.  Savings  Bank,  58  X.  IL  S3. 
Greenwell  vs.  llaydon,  78  Ky.  332. 


274  The  Law  of  Pledge. 

319.  This  principle  has  become  axiomatic  in  Amer- 
ican jurisprudence,  and  the  proposition  that  the 
pledgee  of  negotiable  paper  is  a  holder  for  value 
wherever,  under  the  same  circumstances,  a  purchaser 
would  be,  is  too  clear  to  admit  of  doubt  or  discussion, 
both  upon  principle  and  upon  authority.  The  reason 
is  that,  if  the  essence  of  the  valuable  consideration 
consists  in  parting  with  mone}^,  property^  or  other 
valuable  thing,  it  can  make  no  difference  upon  the 
question  of  consideration,  whether  the  paper  sought 
to  be  enforced  is  to  be  deemed  the  principal  or  only 
the  collateral  security.  The  holder  parts  with  his 
money  or  property  upon  the  faith  of  both,  and  not 
upon  the  faith  of  one  of  them.  If  he  is  a  holder  for 
value  of  the  principal  obligation,  so  he  is  of  collateral 
security  •  the  two,  in  regard  to  the  element  of  consid- 
eration, are  inseparable.* 

And  even  in  case  of  a  factor  pledging  without 
authority  and  feloionusly  the  negotiable  paper  of  his 
principal,  to  secure  his  own  debt,  the  law  merchant 
now  prevails,  and  protects  the  honest  pledgee  against 
the  true  owner.  For  a  while,  under  the  strong  press- 
ure of  the  Common  law  principle  that  the  factor  can 
not  pledge,  tliough  he  can  sell  the  property  of  his 
piincipal,  the  law  merchant  was  checked  in  that 
respect,  even  in  regard  to  negotiable  paper,  and  the 
pledgee  of  such  paper  was  sacrificed  to  the  true  owner. 
But  this  doctrine  had  ultimately  to  yield  to  the  interest 

*  Bank  of  Xew  York  y>;.  Vanderborst.  S2  N.  Y.  r>:,7. 


Commercial  Pledges.  275 

of  trade  and  finance,  and  the  contrary  rule,  as   stated 
above,  was  established.* 

320.  However  well  established  the  principle  is  with 
us  that  the  pledgee  of  negotiable  paper  is  a  holder  for 
value  wherever  the  purchaser  would  be  so  under  the 
same  circumstances,  the  rule  has  in  a  recent  case  been 
again  the  subject  of  the  full  consideration  of  the  House 
of  Lords.  A  broker  in  London  pledged  to  a  bank,  to 
secure  loans  of  money  for  his  own  account,  certain 
bonds  belonging  to  his  principal.  The  pledge  was 
without  authority  from  the  owner  of  the  bonds. 
These  were  negotiable  instruments.  The  question  was 
whether  the  bank  as  pledgee  had  a  good  title  against 
the  true  owner  and  could  be  considered  a  holder  in 
good  faith,  not  having  made  inquiries  under  the  cir- 
cumstances, as  to  the  power  of  the  broker  to  pledge 
the  bonds. 

Lord  Herschell  said:  "  The  question,  then,  which 
presents  itself  is,  whether  the  appellants  (the  bank), 
who  are  in  possession  of  negotiable  instruments  which 
were  deUvered  to  them,  I  will  assume,  in  fraud  of  the 
plaintiff,  the  true  owner,  can  make  good  their  title  to 
ihem.^  That  they  became  holders  for  value  is  not 
disputed ;  nor  is  it  disputed  that  they  took  with 
full  honesty  of  purpose.  The  allegation  in  the  state 
ment  of  claims  is  as  follows  :  •  The  bank  knew,  and 
had  notice,  not  only  from  the  general  course  of  busi- 
ness hereinbefore  referred  to,  but  from  the  particular 
transactions  between  them  and  the  plaintiffs  brokers, 


Kent's  Com  111..  Vol.  2,  p.  027.  . 
Story,  on  Bailments,  Sec.  32G. 


276  The  Law  of  Pledge. 

that  the  securities  deposited  with  them  by  the  plain- 
tiff's brokers  were  the  securities  of  the  customers  of 
such  brokers,  and  in  the  belief  that  the  brokers  who 
brought  them  had  made  sufficient  advances  on  them 
to  justify  them  in  obtaining  the  amounts  which  they 
from  time  to  time  obtained  from  the  bank,  and 
relymg  on  the  integrity  of  the  brokers  the  defend- 
ant's bank  from  time  to  time  made  and  continued 
advances  to  the  brokers  on  such  securities  as 
the  brokers  from  time  to  time  deposited  with 
them.'  Applying  this  allegation  to  the  transaction 
under  consideration,  it  would  be  impossible  to  con- 
ceive a  more  unequivocal  admission  that  the  appellants 
acted  in  complete  good  faith  in  taking  the  bonds  in 
question.  But  the  statement  of  claim  goes  on  to 
allege  that  the  bank  '  made  no  specific  inquiries  as  to 
the  ownership  of  the  said  securities,  or  the  authority 
(if  any)  which  the  brokers  had  to  deposit  the  same,  or 
the  interest  (if  any)  which  the  brokei-s  had  therein  by 
reason  of  advances  on  such  securities  or  otherwise.'  It 
is  upon  this  allegation  that  the  bank  had  notice  that  Del- 
mar  held  these  bonds  in  the  capa'^ity  of  an  agent  that 
reliance  is  placed.  I  defer  entering  upon  the  inquiry 
whether  it  has  been  proved  that  the  bank  had  either 
notice  or  knowledge  that  Delmar's  title  to  the 
bonds  was  that  of  an  agent  only.  Assuming 
for  the  moment  that  this  was  proved,  what  is  its 
effect.^  It  is  contended  on  behalf  of  the  respondent, 
as  I  understand,  that  it  put  the  bank  upon  inquiring 
as  to  the  title  of   the    person  with   whom  they  dealt. 


Commercial  Pledges.  277 

and  as  to  the  authority  which  he  possessed ;  and  that 
having  made  no  such  inquiry,  they  obtained  as  against 
his  principal  no  better  title  than  he  had.  It  was  ad- 
mitted that  any  one  buying  from  Delmar  would  have 
obtained  an  unimpeachable  title,  notwithstanding  his 
knowledge  that  Delmar  was  a  broker,  and  that  the 
bonds  were  the  property  of  his  principal.  What 
ground  is  there  for  the  position  that  in  regard  to  a 
pledge  the  case  is  different,  that  one  may  safel}-  take 
a  negotiable  instrument  by  way  of  sale  from  an  agent 
without  inquiry,  but  can  not  so  take  it  by  way  of 
pledge?  It  is  surely  of  the  very  essence  of  a  nego- 
tiable instrument  that  you  ma}^  treat  the  person 
in  possession  of  it  as  having  authority  to  deal 
with  it,  be  he  agent  or  otherwise,  unless  you  know  to 
the  contrary,  and  are  not  compelled  in  order  to  secure 
a  good  title  to  yourself,  to  inquire  into  the  nature  of 
his  title  or  the  extent  of  his  authority.  The  Factors 
Act  (6  Geo.  4,  c.  94),  which  gives  validity  to  sales  and 
pledges  by  persons  entrusted  with  the  documents  of 
title  to  goods,  contained  a  proviso  '  that  the  pur- 
chaser or  pledgee  had  not  notice  by  the  documents  or 
otherwise,  that  the  seller  or  pledgeor  was  not  the  act- 
ual and  bona  fide  owner  of  the  goods  sold  or  pledged 
— a  proviso  which,  especially  after  the  decision  in 
Fletcher  vs.  Heath,  rendered  it  unsafe  to  make 
advances  on  goods  or  documents  to  persons  known  "-.o 
have  possession  thereof  as  agents  only  '  (per  Black- 
burn J.  in  Cole  vs.  Northwestern  Bank).  Accordingly 
the    Legislature    intervened    and    altered  the  law  by 


278  The  Law  of  Pledge. 

the  5  and  6  Vict.,  c.  39.  The  recital  is  noteworthy, 
that  '  advances  on  the  security  of  goods  and  mer- 
chandise have  become  an  usual  and  ordinar}'  course 
of  business,  and  it  is  expedient  and  necessary  that 
reasonable  and  safe  facilities  should  be  afforded 
thereto/  Under  this  act  a  document  of  title  to  goods 
may  safely  be  taken  by  way  of  pledge  from  one 
known  to  be  an  agent  without  inquiry  as  to  his 
authority.  It  would  be  strange,  indeed,  if  a  nego- 
tiable instrument  mio;ht  not  as  safely  be  taken.  Ad- 
vances  on  the  security  of  negotiable  instruments  are 
as  usual  and  ordinary  a  course  of  business  as  advances 
on  the  security  of  goods  and  merchandise,  and  it  is 
surely  just  as  'expedient  and  necessary  that  reasonable 
and  safe  facilities  should  be  afforded  thereto.'  It 
was  truly  said  that  it  was  due  to  the  act  of  the 
Legislature  that  documents  of  title  to  goods  may 
safely  be  taken  by  wa}-  of  pledge  from  an  agent,  and 
that  there  had  been  no  such  legislation  in  relation  to 
negotiable  instruments.  Butwhynot.'^  The  answer, 
to  my  mind,  is  plain — because  it  never  was  supposed 
to  be  necessary  in  order  to  give  validity  to  such  a 
transaction  in  the  case  of  negotiable  instruments.  It 
is  admitted  that,  in  the  case  of  a  sale,  legislation  was 
not  requisite ;  that  the  fact  that  the  instruments  were 
negotiable  sufficed ;  why  not,  then,  in  the  case  of 
pledge?  If  the  contention  of  the  respondent  is  to 
prevail,  a  negotiable  instrument  will  be  less  negotia- 
ble than  a  bill  of  lading  or  a  dock  warrant — a  strange 
conclusion,  surely.     The  truth  is,  in  my  opinion,  that 


Commercial  Pledges.  279 

what  the  Factors  Acts  have  done  is  to  attach  some 
of  the  elements  of  negotiabiHty  to  documents  of  title 
to  goods,  render  the  mere  possession  of  them  evidence 
of  authorit}'  to  deal  with  them  in  the  ordinary  course 
of  business,  and  to  preclude  the  necessity  of  any 
further  inquiry.'"^ 

321.  But  it  follows  also  from  the  rule  that  the 
pledge  of  negotiable  paper  is  entirely  governed  by 
the  law  merchant — that,  like  the  discount  and  pur- 
chase of  the  same,  the  pledge  is  subject  to  the  same 
diversity  of  opinion  as  to  what  constitutes  the  pledgee 
a  holder  for  value  in  certain  cases.  For  instance,  a 
valuable  consideration  for  a  pledge  may  or  may  not 
be  a  pre-existing  debt  of  the  pledgeor,  according  as 
we  follow  the  jurisprudence  of  the  State  of  New  York 
or  that  of  other  States  of  the  Union,  or  that  of  the 
courts  of  the  United  States.  Therefore,  the  true  owner 
of  a  bill  of  exchange  might  recover  it,  as  his  prop- 
ertv,  in  New  York,  against  a  pledgee  in  good  faith, 
whose  debt,  secured  by  the  pledge  of  the  bill,  was  a 
pre-existing  one  of  the  pledgeor.  The  pledgee  there 
would  not  be  a  holder  for  value.  But,  under  the  same 
circumstances,  the  pledgee  in  Louisiana,  or  some  other 
State  of  the  Union,  would  be  a  holder  for  value, 
because  there,  a  pre-existing  debt  is  a  sufficient  con- 
sideration for  negotiable  paper,  and  brings  it  under 
the  rule  of  the  law  merchant.     We  must  observe  that 


*  London  Joint  Stock   Bank  vs.    Simmons,   Law  Reports    Appeal 
Cases  1892,  p.  21(j. 
Earl  of  Sheffield  vs.  London  Joint  Stock  Bank.  13  Appeal  Cases. 
333. 


280  The  Law  of  Pledge. 

it  is  not  in  the  law  of   pledge  that  the  difference  lies, 
but  in  the  law  merchant. 

The  same  equities  would  exist,  or  not,  in  favor  of 
the  drawer,  or  maker,  of  the  negotiable  paper, 
according;  to  the  same  rule  of  the  law  merchant  in 
some  States.* 

322.  The  converse  of  the  rule  is  equally  true,  to- 
wit :  that,  as  the  law  merchant  governs  the  contract  of 
pledge,  negotiable  paper  which  is  past  due  and,  there- 
fore, is  subject  to  the  equities  of  third  persons,  is  sub- 
ject in  the  hands  of  the  pledgee  to  the  rights  of  the 
true  owner  when  it  has  been  pledged  without  his  con- 
sent. The  rule  is  precisely  the  same  whether  the 
negotiable  paper,  which  has  lost  its  character  of  nego- 
tiability, has  been  purchased  by  the  third  holder  or 
received  by  him  on  pledge.  And  the  rule  is  not  in 
any  manner  affected  by  the  fact  that  the  negotiable 
paper  consists  in  bonds  or  interest  coupons  of  the 
States  or  of  the  United  States. f 

323.  The  Court  of  New  York  has  stated  the  prin- 
ciple clearly  when  it  said  that   the    rights    of  a  trans- 


*  Coddington  vs.  Bay.  20  Johns,  G37. 

Swift  vs.  Tyson,  IG  Peters.  ] . 

Givanovich  vs.  Citizens  Bank   26  La.  An.  15. 

Conislock  vs.  Hier,  73  N.  Y.  2G9. 

Gates  vs.  National  Bank.  100  U.  S.  239. 

iiailroad  Company  vs.  National  Bank,  102  U.  S.  14. 

Goodwin  vs.  Loan  Oompan}-,  152  Mass.  199. 

8ee  Jones,  on  Pledges,  Hec.  89  et  seq..  where  the  subject  is  con- 
sidered at  length. 
t  Stern  vs.  Bank.  84  La.  An.  1119. 

Bird  vs.  Cochifm.  28  La.  An.  70. 

Parsons  vs.  Jackson,  99  U.  S.  434. 

Verniilye  vs.  Adams,  21  Wall.  143. 

Texas  vs.  White,  7  Wall.  700. 

Henderson  vs.  Case,  31  La.  An.  215. 

Cowdrey  vs.  Vandenberg,  101  U.  S.  571. 


Commercial  Pledges.  281 

feree,  whether  by  purchase  or  pledge,  were  those  ofc 
p  bona  fide  holder  for  value  of  negotiable  paper,  when- 
the  transfer  was  made  in  the  usual  mode  and  in  the 
ordinary  course  of  business  and  without  notice  of  any 
defects  in  the  title.  Those  rights  are  protected  by  the- 
law  merchant  against  all  latent  equities,  whether  oi 
third  persons  or  of  parties  to  the  instrument  The  title- 
of  such  pledgee  or  transferee  is  perfect,  and  his  right 
to  enforce  the  obligation  is  absolute.  But  if  any  of  the 
circumstances  are  wanting  which  go  to  make  up  a  per- 
fect title,  a  purchaser  or  pledgee  of  commercial  paper 
takes  it  subject  to  the  same  rules  which  control  in  the 
case  of  a  transfer,  assignment  or  pledge  of  non-nego- 
tiable instruments. 

In  the  case  of  a  pledge  of  negotiable  paper,  even 
in  the  ordinary  course  of  business,  before  maturity, 
and  for  value,  delivery  and  possession  of  the  thing" 
pledged  is  as  essential  and  indispensable  as  in  the 
pledge  of  any  other  kind  of  property.  And  there  is 
no  such  thing  as  a  symbolical  delivery  of  negotiable 
instruments.  The  law  does  not  recognize,  for  com- 
mercial purposes,  a  right  of  possession  as  distinct 
from  the  actual  possession.  The  evidence  of  owner- 
ship of  negotiable  bills  is  their  possession,  properly 
endorsed,  so  as  to  pass  the  title  to  the  holder."^' 

324.  From  the  fact  that  in  the  pledge  of  negotiable 
paper  for  a  valuable  consideration  before  maturity 
and  in  the  usual  course  of  business,  the  law  mer- 
chant, and  not  the  law  of  pledge,  governs  (or  rather 


*  IMuIIer  vs.  Pondir,  55  X.  Y.  325. 


282  The  Law  of  Pledge. 

because  the  law  of  pledge  is  in  such  cases  merged 
into  the  law  merchant),  it  follows  that  the  pledgee  of 
such  paper  can  validly^  if  not  rightly^  subpledge,  or 
transfer  the  pledge,  to  secure  his  own  indebtedness. 
We  say  validly,  because  his  transferee  will  have  a 
good  title  against  the  true  owner;  but  not  rightly, 
because  without  the  consent  of  the  owner,  the  pledgee 
has  no  right  to  make  use  of  the  pledge  for  his  own 
benefit,  and  therefore  has  no  right  to  use  it  for  the 
purpose  of  obtaining  credit  and  securing  his  own 
creditor.  "^ 


Matthews  vs.  Rutherford,  7  La.  An.  225. 
Building  Association  vs.  Ferguson,  29  La.  An.  548. 
Tucker  vs.  Savings  Bank,  58  N.  \\.  83. 
Bank  of  New  York  vs.  Vanderhorst,  32  X.  Y.  557. 
Story,  on  Pledges,  Sec.  322. 


CHAPTER    XXVIII. 

Commercial  Pledge   Under  the  Law  of  France 
AND  Other  Countries  of  the  Civil  Law. 

325.  The  French  Code  of  Commerce,  as  modified 
and  completed  by  a  law  of  the  year  1863,  is  probably 
the  most  perfect  work  of  legislation  which  governs 
the  Commercial  Pledge.  As  far  as  human  prevision 
can  go,  it  clears  up  the  uncertainties  and  supplies  the 
deficiencies  of  the  Common  law  on  this  subject  and 
releases  this  important  branch  of  the  Commercial  law 
from  the  obstructive  formalities  of  the  Civil  law.  In 
not  more  than  three  articles  this  instrument  of  legal 
wisdom  establishes  what  the  Commercial  pledge  is, 
between  what  persons  it  may  take  place,  what  can  be 
the  subject  of  it,  under  what  form  it  may  be  made, 
what  the  rights  of  the  contracting  parties  are.  It 
fixes  the  difference  between  the  Commercial  pledge 
and  the  pledge  of  the  Civil  law.  It  facilitates,  en- 
courages and  secures  commercial  transactions.  The 
whole  subject  is  provided  for  in  the  following  words  : 

"Article  91.  The  pledge,  constituted  either  by  a 
trader  or  by  a  person  who  is  not  a  trader,  for  a  com- 
mercial transaction,  is  proved  in  reference  to  third 
persons,  as  well  as  to  contracting  parties,  conformably 
to  the  provisions  of  Art.  109  of  the  Code  of  Com- 
merce. The  pledge  in  respect  to  negotiable  effects 
may  also  be  established  by  a  regular  endorsement 
indicating  that  these  effects   have    been    delivered   as 

283 


284  The  Law  of  Pledge. 

security.  In  respect  to  shares  of  stock,  shares  of 
interest  and  of  nominative  obhgations  of  financial, 
industrial,  commercial  or  civil  partnerships,  the  con- 
veyance of  which  is  made  by  a  transfer  on  the  books 
of  the  company,  the  pledge  may  equally  be  estab- 
lished by  a  transfer,  by  way  of  securit}',  registered  on 
the  said  records.  The  provisions  of  Art.  2075  °^  ^^^ 
Civil  Code  concerning  movable  credits,  in  the  posses- 
sion of  which  the  assignee  can  only  be  put,  in  respect 
to  third  persons,  by  notice  of  the  transfer  given  to  the 
debtor,  are  not  hereby  affected.  Commercial  effects 
given  in  pledge  may  be  collected  and  appropriated  bv 
the  pledgee." 

"  Article  92.  In  all  cases,  the  privilege  of  the 
pledgee  subsists  only  when  the  pledge  has  been 
put  and  remained  in  his  possession,  or  in  that  of  a 
third  person  agreed  upon  by  the  parties.  The  creditor 
is  considered  as  having  the  goods  in  his  possession, 
when  they  are  at  his  disposal  in  his  stores  or  ships,  at 
the  custom-house  or  in  public  warehouse,  or  if,  before 
they  arrive,  he  has  possession  by  means  of  a  bill  of 
lading." 

'•Article  93.  In  default  of  payment  when  the 
same  is  due,  the  creditor  may,  eight  days  after  notice 
to  the  debtor  or  pledgeor,  cause  the  things  pledged  to 
be  sold  at  public  sale.  The  sales,  other  than  those  of 
which  the  stockbrokers  alone  have  charore,  are  made 
through  commercial  brokers.  However,  at  the 
request  of  the  parties,  the  president  of  the  Court  of 
Commerce    may    designate    another   class    of    public 


Commercial  Pledge  Under  the  Law  of  France.     285 

officers  to  make  the  sale.  In  that  case,  the  pubHc 
officer,  whoever  he  may  be,  who  has  charge  of  the 
sale,  is  subjected  to  the  rules  which  govern  the  brokers 
in  relation  to  the  forms,  tariffs  and  responsibilities. 
The  provisions  of  Articles  2  and  7  inclusively  of  the 
law  of  the  28th  of  May,  1858,  on  public  sales,  are 
applicable  to  the  sales  provided  for  in  the  preceding 
paragraph.  Any  clause  which  would  authorize  the 
creditor  to  appropriate  the  pledge  to  himself,  or  to  dis- 
pose of  it  without  the  formalities  herein  prescribed, 
is  void.'' 

^26.  In  providing  that  the  Commercial  pledge  is 
established,  both  in  regard  to  third  persons  and  to  the 
parties  themselves,  according  to  the  requirements  of 
Art.  109  of  the  Code  of  Commerce,  the  French  law 
relieves  that  contract  of  the  necessity  of  the  written  act 
demanded  by  the  Civil  law,  and  permits  the  verbal 
pledge  in  commercial  transactions.  Article  109  reads 
thus  :  "  The  purchases  and  sales  (of  goods  and  com- 
mercial effects)  are  established :  by  public  acts ;  by 
acts  under  private  signature  ;  by  the  memorandum  of 
a  stockbroker  or  a  commercial  broker,  duly  signed  by 
the  parties  ;  by  an  invoice  accepted  ;  by  the  correspon- 
dence ;  by  the  books  of  the  parties  ;  by  the  verbal  proof 
in  cases  where  the  Court  will  think  proper  to  admit 
it." 

327.  Where  it  is  not  incompatible  with  these  pro- 
visions of  the  Code  of  Commerce,  the  Commercial 
pledge  is  still  governed  by  the  rules  established  by  the 
Code  Napoleon.     Thus,  the  parties  to  the  contract  so 


286  The   Law  op  Pledge. 

far  as  their  competency  is  concerned,  must  be  such  as 
designated  by  the  Civil  Code ;  and  the  things  which 
may  be  given  in  pledge  are  equally  those  which  are 
there  declared  to  be  susceptible  of  being  pledged. 

By  the  French  law,  the  Commercial  pledge  takes 
place  as  well  between  traders  as  between  persons  who 
are  not  traders  on  both  sides,  in  this,  that  the  creditor 
needs  not  be  a  trader  ;  but  the  debtor  or  pledgeor  must 
be  one,  because  the  Commercial  pledge  must  be  given 
for  a /I  act  of  commerce^  says  the  article,  and  such  acts 
or  transactions  necessarily  take  place  in  the  affairs  of 
traders  or  commercial  men. 

Nor  needs  the  thing  given  in  pledge  be  a  commer- 
cial effect.  The  debtor  and  pledgeor  may  validly 
pledge  any  property  susceptible  of  being  pledged  in 
the  Civil  law,  and  such  security  shall  be  governed  by 
the  law  of  the  Commercial  pledge,  provided  the  obli- 
gation to  be  thereby  secured  arises  from  a  commercial 
transaction.  But  it  is  proper  to  observe  that,  when 
negotiable  effects  are  pledged,  it  is  necessary  that  the 
endorsement  by  which  the  transfer  is  made  should 
state  that  they  have  been  delivered  as  security. 

328.  There  is  the  same  essential  necessity  in  the 
Civil  law  and  the  Commercial  pledge  that  the  pledgee 
should  have  possession  of  the  thing  pledged.  That 
possession  ma}^,  in  both  cases,  be  only  symbolical  or 
constructive.  If  a  credit  is  pledged,  notice  of  the 
pledge  to  the  debtor  of  the  credit  is  equally  necessary 
in  the  Commercial  pledge  to  constitute  the  possession 
of  the  pledgee. 


Commercial  Pledge  Under  the  Law  of  Prance.     287 

Hence  it  follows  that,  when  possession  of  a  thing 
can  not  be  delivered,  as  in  the  case  of  things  infiduro^ 
or  of  claims,  or  credits,  or  other  rights  to  which  there 
is  no  title  attached,  the  pledge  of  such  things  can  not 
be  legally  made. 

In  the  Commercial  pledge  of  shares  of  stock,  if  they 
are  to  bearer^  the  mere  delivery  of  the  certificate  or 
title  to  the  pledgee  operates  as  a  pledge.  If  the  shares 
of  stock  are  nominative,  the  pledge  must  be  notified 
to  the  company  and  a  transfer  made  on  its  books.* 

And  we  see,  also,  by  the  article  of  the  French  Code 
of  Commerce  that  the  factum  commissorium,  or  the 
clause  by  which  the  pledgee  would  stipulate  that  the 
thing  pledged  should  become  his  property  in  default 
of  payment  of  the  debt,  is  equally  prohibited  in  the 
Commercial  pledge. 

329.  The  two  great  distinctive  features  of  the 
French  law  of  pledge  are  that  the  Commercial  pledge 
needs  not  be  evidenced  by  a  written  act,  and  that  the 
creditor  is  not  submitted  to  the  necessity  of  bringing 
suit  against  the  pledgeor  for  the  purpose  of  selling 
the  pledge,  but  has  the  right  to  put  it  up  for  sale  after 
a  notice  of  eight  days  to  the  debtor. f 

We  see  in  this  again  the  constant  solicitude  of  the 
law,  common  to  all  countries,  for  the  interests  of  com- 


*  Laurent,  Nantissement,  Sec.  441. 

Troplong,  Nantissement,  Sees.  292,  286. 
t  French  Code  of  Commerce,  Arts.  91.  92,  93  and  109. 

Goiraud,  French  Code  of  Commerce,  p.  152  et  seq. 

Baudry-Lacantinerie,  Nantissement,  Sec.  147  ct  seq. 

Troplong,  Nantissement,  Sec    110  et  passim. 

Laurent,  Nantissement,  Sec.  490. 

Pont,  Nantissement,  p.  070  pt  seq. 


'288  The  Law  of  Pledge. 

merce.  Commercial  transactions  brook  no  delays 
•or  formalities  which  cause  dehiy.  Therefore  none 
rshould  be  incurred  in  preparing  written  acts  of  pledge 
in  the  affairs  of  merchants.  Nor  should  these  be  hin- 
dered by  legal  proceedings  in  the  recovery  of  their 
claims  and  realization  of  their  securities  when  they 
have  immediate  need  of  their  capital.  The  French 
Code  of  Commerce  and  the  Common  law  have  joined 
hands  in  this  matter. 

330.  The  general  march  of  modern  and  recent 
legislation  in  the  countries  of  Civil  law  is  toward  the 
protection  of  the  pledgee  in  commercial  transactions, 
even  to  the  prejudice  of  the  true  owner  when  his 
property  has  been  disposed  of  without  his  consent  by 
an  unfaithful  agent. 

Thus  the  Code  of  Commerce  of  the  German  Em- 
pire provides  :  "  When  merchandise  or  other  mov- 
.ables  of  a  merchant  are  alienated  and  delivered  in  the 
course  of  his  business,  the  purchaser  in  good  faith 
acquires  the  ownership  thereof,  even  when  the  seller 
was  not  the  owner. 

"  The  original  ownership  is  extinguished.  Any  prior 
right  of  pledge  or  other  real  right,  if  unknown  to  the 
purchaser,  is  extinguished.  If  merchandise  or  other 
movables  are  pledged  and  delivered  bv  a  merchant  in 
the  course  of  his  business,  no  prior  ownership,  pledge 
•or  other  real  right  on  such  merchandise  or  movables 
<:an  prevail  to  the  detriment  of  the  pledgee  in  good 
iaith  or  his  assigrnee. 

^'  The  statutory  pledge  of  a  commissioner,  consignee 


Commercial  Pledge  Under  the  Law  of  France.     289 

or  carrier  rests  upon  the  same  basis  as  the  right  of  con- 
tractual pledge.  This  article  has  no  application  when 
the  things  were  lost  or  stolen."* 

We  find  also  in  the  Code  of  Commerce  of  the 
Netherlands  that,  if  goods  sold  and  unpaid  for  are 
claimed  by  the  vendor  when  they  have  been  pledged 
by  the  purchaser  to  a  pledgee  in  good  faith,  the  latter 
can  not  be  compelled  to  surrender  them  without  being 
paid  the  amount  of  his  debt ;  and  that  such  is  the  law, 
even  when  the  goods  have  been  pledged  by  a  com- 
missioner or  a  factor. f 

And  this  is  the  constantly  appearing  contrast  of  the 
Common  law  and  the  Civil  law  in  the  disposition  of 
personal  propert}^  by  an  unfaithful  agent ;  the  Common 
law  ever  shielding  the  true  owner  against  even  an 
honest  vendee  or  pledgee  ;  the  Civil  law  always  pro- 
tecting the  honest  vendee  or  pledgee  against  even  the 
true  owner. 


*  Code  of  Commerce  of  the  German  Empire,  Art.  306. 

t  Code  of  Commerce  of  the  Netherlands,  Arts.  237  and  241. 


CHAPTER  XXIX. 

Pledge  of  Bills  of  Lading. 

331.  The  bill  of  lading  is  every  day  in  commer- 
cial affairs  the  subject  of  the  contract  of  pledge. 
More  properly  speaking,  and  with  a  better  under- 
standing of  the  matter,  it  is  not  the  bill  of  lading 
itself  which  is  pledged,  but  the  goods  or  merchandise 
for  which  it  is  a  receipt  given  b^  the  common  carrier, 
and  which  it  may  be  said  that  it  represents.  From  the 
time  that  bills  of  lading  were  first  used,  in  the  early 
days  of  modern  trade,  usage,  which  is  the  basis  of 
commercial  law,  established  the  rule  that  the  holder 
of  the  bill,  whether  the  original  one  or  a  subsequent 
transferee,  was  apparently  the  owner  of  the  goods, 
and  therefore  entitled  to  the  delivery  and  possession  of 
them.  Until  he  has  delivered  them  the  common  car- 
rier is  the  agent  of  the  holder  of  the  bill,  whoever  he 
may  be,  and  his  possession  is  that  of  the  said  holder. 
The  pledgee  has,  therefore,  possession  of  the  goods 
through  the  common  carrier,  the  moment  the  bill  of 
lading  is  transferred  to  him,  as  the  owner  or  shipper 
had  before  the  transfer.  The  bill  is  not  the  symbol  of 
the  goods,  as  said  by  some  writers,  but  more  properly 
the  title  to  them.  The  possession  of  the  pledgee  by 
means  of  the  bill  is  not  merely  symbolical  or  ficti- 
tious, but   corporeal,  though  vicarious,   as  the   com- 

291 


292  The  Law  of  Pledge. 

moil  carrier  is  holding  the  goods  for  him  until  de- 
livery.^ 

It  is  not,  therefore,  because  the  bill  of  lading  repre- 
sents the  goods  that  the  transfer  of  it  makes  a  valid 
pledge  of  them.  It  is  because  the  transfer  of  the  bill 
transfers  also  the  possession  of  the  goods  to  the  pledgee, 
and  thereby  fulfils  in  that  respect  that  essential  condi- 
tion of  the  contract  of  pledge. 

The  same  thing  may  be  said  of  the  pledge  of  goods 
deposited  in  a  warehouse  or  store.  The  delivery  of 
the  ke^'s  of  a  store  to  the  pledgee  constitutes  the  deliv- 
ery and  possession  of  the  goods,  not  because  the  keys 
are  symbolical  of  the  goods,  but  because  the  pledgeor 
thereb}'  loses  his  possession  and  control  of  them,  and 
transfers  thereby  the  same  control  and  possession  to 
the  pledgee. t 

It  is  only  in  the  pledge  of  incorporeal  things,  such 
as  credits  or  claims,  that  the  delivery  and  possession  are 
symbolical  or  fictitious,  and  made  by  the  transfer  of 
the  title  or  evidence  of  the  rights  to  the  pledgee  and 
by  notice  to  the  debtor  of  the  claim. J 

332.  If  the  transferee  of  the  bill  of  lading  was  not, 
apparently  at  least,  the  owner  of  the  goods  and 
entitled  to  the  delivery-  and  possession  of  them,  and 
if  the  pledgee  could  not  be  put  in  possession  until 
actual  and  corporeal  delivery,  on  arrival  of  the  vessel. 


*  Jones,  on  Pledges,  Sec.  227. 

Troplong,  Nantissement,  Sec.  324. 
t  Troplong,  Xantissement,  Sec.  324 

Porter,  on  Bills  of  Lading,  Sec.  496. 
X  Civil  Code  of  Louisiana,  Art.  3153. 


Pledge  of  Bills  of  Lading.  293 

it  is  evident  that  the  pledge  of  the  bill  of  lading  itself 
would  be  no  security  to  the  creditor,  and  bills  of 
lading  would  not  play  the  all-important  part  that 
they  now  play  in  the  immense  commercial  and  finan- 
cial affairs  of  the  world.  Nor  would,  in  that  case, 
the  goods  and  merchandises  themselves  be  the  subject 
of  the  enormous  commerce  of  the  world. 

We  say  that  the  pledgee  of  the  bill  of  lading  is 
apparently  the  owner  of  the  goods,  and  so  he  is  to 
the  extent  of  the  debt  secured  by  the  pledge.  But 
we  must  not  forget  that  the  transfer  of  the  bill  to  him 
is  only  the  execution  of  a  contract  of  security,  and 
consequently  that  the  absolute  ownership  of  the  bill 
or  of  the  goods  is  not  conveyed  to  him.  The  transfer 
is  intended  to  sectcre  the  payme?it  of  the  debt,  not  to 
effect  payment.  If  the  bill  of  lading  were  to  be  inval- 
idated for  some  reason  or  other,  or  if  the  oroods  were 
destroyed  by  some  accident,  the  security  would  be 
gone,  but  the  debt  would  still  subsist.  If  the  transfer 
of  the  bill  were  intended  to  eff'ect  payment,  it  is  evi- 
dent that  from  that  moment  the  transferee  would 
become  absolute  owner  of  the  goods,  but  the  relation 
of  debtor  and  creditor  would  cease  between  the 
pledgeor  and  the  pledgee. 

333.  The  writer  of  the  opinion  of  the  Court  in  the 
case  of  Mearns  vs.  Bank  of  Randall,  146  U.  S.  627, 
expressed  himself,  therefore,  erroneously  when  he 
said  :  "  As  to  the  four  car  loads  named  in  the  bill  of 
lading,  that  instrument  represented  the  cattle ;  and 
the  transfer  of  the  ownership,  as  well  as  of  the  right 


294  The  Law  of  Pledge. 

of  possession,  was  made  as  effectually  by  the  transfer 
of  the  bill  as  it  could  have  been  by  a  physical  deliv- 
ery of  the  cattle."  The  case  was  one  of  a  pledge  to 
secure  a  loan  of  money.  Had  the  security  failed  for 
one  reason  or  the  other,  the  lender  would  clearly  have 
been  a  creditor  still. 

It  is  evident  that  the  Court  did  not  mean  that  the 
absolute  ownership  was  conveyed  to  the  pledgee  in 
the  sense  which  the  word  ownership  has  in  law  and 
under  the  definition  which  the  Institutes  of  Justinian 
give  of  it :    '"''  yus  utendi^  friiendi  et  abuteiidi.'''' 

The  next  paragraph  in  the  opinion  expresses  the 
real  meaning  of  the  Court:  "When  the  bill  of  lad- 
mg  was  transferred  and  delivered  as  collateral  security, 
the  rights  of  the  pledgee  under  it  were  the  same  as 
those  of  an  actual  purchaser  so  far  as  the  exercise  of 
those  rights  was  necessary  to  protect  the  holder." 

The  use  of  the  word  ownership  in  speaking  of  the 
transfer  of  a  bill  of  lading  to  a  pledgee  is  a  deplora- 
ble confusion  of  terms  in  jurisprudence,  especially 
where  it  is  found  in  the  decisions  of  the  highest  Court 
of  the  land. 

334.  The  cases  cited  in  the  opinion  in  support  of 
the  principle  that  the  pledgee,  as  transferee  of  a  bill 
of  lading,  is  a  qualified  owner  of  the  same  have  not 
been  more  guarded  or  more  correct  in  their  language 
in  this  particular.  In  the  case  of  Dows  et  al.  vs. 
National  Exchange  Bank^  91  U.  S.  R.  632,  the 
Court  said:  "When,  therefore,  the  drafts  against  the 
wheat  were  discounted   by  that  bank,  and  the  bills  of 


Pledge  of  Bills  of  Lading.  295 

lading  were  handed  over  with  the  drafts  as  security, 
the  bank  became  the  owner  of  the  wheat  and  had  a 
complete  right  to  maintain  it  until  payment.  The 
ownership  of  McLaren  &  Co.  was  transmitted  to  it, 
and  it  succeeded  to  their  power  of  disposition.  That 
the  bank  never  consented  to  part  with  its  ownership 
thus  acquired  so  long  as  the  drafts  it  had  discounted 
remain  unpaid  is  rendered  certain  by  the  uncontra- 
dicted written  evidence." 

We  see  in  those  cases,  words  placed  in  juxtaposi- 
tion, which  are  incompatible  together  when  applied  at 
the  same  time  to  the  same  person,  to-wit :  security 
and  oivnershi-p.  A  person  can  not  have  a  lien  or 
security  on  propert}^  of  which  he  is  the  owner. 

335.  The  term  property  used  to  designate  the  right 
of  a  pledgee,  or  of  a  mortgagee,  over  the  personal 
property  affected  by  his  lien  and  transferred  to  him 
for  the  purpose  of  securit}'  only,  has  been  that  of 
special  or  qualified  propei'ty.  To  pass  from  that  to 
the  words  oivtier  and  ownership  without  qualification 
is  a  looseness  of  language  which  is  prejudicial  to  the 
understanding  of  jurisprudence.  The  Civilians  are 
more  exact  and  more  careful  of  their  expressions  in 
the  discussion  of  legal  subjects. 

336.  Though  the  pledgee  of  the  bill  of  lading  is 
not  the  absolute  owner  of  the  goods  which  it  covers, 
he  is  fully  entitled  to  the  delivery  and  possession  of 
them,  and  this  is  what  makes  the  importance  of  it. 
The  pledgee's  right  is,  therefore,  superior  to  that  of 
the  unpaid  vendor  of  the  goods.     The  latter  could  not 


296  The  Law  ob^  Pledge. 

exercise  against  him  the  right  of  stoppage  in  transitu. 
And  in  the  Civil  law  countries  the  vendor's  privilege 
or  lien  for  the  unpaid  price  would  yield  to  the  higher 
lien  of  the  pledge.  And  it  is  so  whether  the  bill  of 
lading  is  negotiable  or  not,  as  it  is  in  some  States 
and  not  in  others.  The  rule  is  based  upon  the  prin- 
ciple that  the  shipper  or  original  holder  of  the  bill  of 
lading  has  parted  with  his  right  of  possession  of  the 
goods  and  transferred  the  same  to  the  pledgee  by 
endorsing  the  bill  to  the  latter.'^ 

337.  There  has  been  a  great  diversity  of  opinion  in 
France  on  the  question  whether,  in  case  of  a  bill  of 
lading,  not  to  order,  not  to  bearer,  but  to  a  designated 
person,  the  pledgee  of  the  bill  by  simple  endorsement 
from  the  latter  was  entitled  to  possession  of  the  goods 
against  an  unpaid  vendor  ;  in  other  words,  whether 
such  endorsement  would  constitute  a  valid  pledge 
without  a  transfer  of  the  goods  by  a  deed  of  pledge. 
The  courts  and  the  commentators  of  the  Code  Napo- 

*  Troplong,  Nantisseiiient.  Sec.  327. 
Jones,  on  Pledges,  Sec.  200. 
Porter,  on  Bills  of  Lading.  Sec.  510  et  seq. 
Benjamin,  on  Sales,  Sec.  8(i4  and  notes. 
Dows  vs.  Bank,  91  U.  S.  618. 
Bank  vs.  Dearborn,  115  Mass.  219. 
Holmes  vs.  Bank,  87  Penn.  St.  52.5. 
Emery  vs.  Bank,  25  Oliio,  3b0. 
Bank  vs.  Mej'er  &  Co.,  43  La.  An.  1. 
Halsey  vs.  Warden,  25  Kansas,  128. 
Bank  vs.  Homeyer,  45  Mo.  l45. 
Richardson  vs.  Bank,  A.  R.,  Vol.  31,  p.  140. 
Gumbel  vs.  Beer,  36  La.  An.  491. 
Delgado  vs.  Wilbur,  25  La.  An.  84. 
Colgate  &  Co.  vs.  Penn.  Co.,  102  N.  Y.  120. 
Bank  vs.  Logan,  74  N.  Y.  568. 
Bank  vs.  Kelly,  57  N .  Y.  34. 
Bank  vs.  Fiske,  71  N.  Y.  353. 

Sewell  vs.  Burdick  et  als..  House  of  Lords,  Appeal  Cases,  1884-86, 
p.  74. 


Pledge  of  Bills  of  Lading.  297 

leon  are  divided  on  the  subject.  The  Court  of  Cassa- 
tion held  that  such  pledge  by  endorsement  of  a  non- 
negotiable  bill  of  lading  was  not  valid.  Troplong 
sides  in  the  discussion  with  the  Court  of  Cassation, 
He  says  very  rightly  :  "  When  the  bill  of  lading  is  to 
a  designated  person  it  does  not  belong  to  him  to  make 
it,  of  his  own  authority,  negotiable  b}'  endorsement. 
The  originator  of  the  bill  of  ladin^  not  having;  made 
it  negotiable  ab  initio^  it  is  not  allowed  to  the  person 
specially  named  in  the  instrument  to  render  it  such 
by  his  sole  will.  It  would  be  transforming  the  con- 
tract and  changing  its  nature.  In  such  case  the 
endorsement  creates  simply  a  power  of  attorney  and 
the  holder  of  the  bill  of  lading  is  subject  to  all  equi- 
ties. This  is  what  the  Court  of  Cassation  hasdecided."* 

Such  a  case  is  governed  by  the  rules  of  the  Civil 
Law,  and  not  by  those  of  the  law  merchant,  from 
which  the  parties  have  departed  by  making  an  uncom- 
mercial bill  of  lading. 

338.  The  Court  of  Louisiana  has  maintained  the 
same  principle  in  a  recent  case,  though  the  decision  is 
subject  to  criticism  on  other  grounds.  In  that  case 
the  factor  of  a  cotton  planter  pledged,  to  secure  his 
personal  debt,  a  bill  of  lading  covering  a  number  of 
bales  of  cotton  of  his  principal.  By  the  law  of  Lou- 
isiana, factors  have  no  right  to  pledge  the  property  of 
their  principals   for  their  own   debts.     The  bill  of  lad- 


*  Troplong,  Nantissement,  Sees.  330  and  337. 

Court  of  Cassation,  13  August,  1879,  .Journal   du   Palais,  1891. 
t  Troplong,  Nantissement,  Sec.  330. 

Court  of  Cassation,  13  i^ugust,  1879,  Journal  du  Palais,  1881. 


298  The  Law  of  Pledge. 

ins:  was  issued  to  the  factor  eo  ?iomine  as  consio^nee 
of  the  cotton,  but  not  to  his  order.  The  owner  claimed 
the  cotton  against  the  pledgee,  pleading  the  invahdity 
-of  the  pledge.  The  pledgee  contended  that,  under  the 
statute  of  Louisiana,  the  bill  of  lading  was  negotiable 
in  the  same  manner  and  to  the  same  extent  as  a  bill 
of  exchange,  and  that  he  was  therefore  to  be  consid- 
ered as  a  holder  for  value  and  in  good  faith. 

The  Court  held  that  the  bill  of  lading  was  not  trans- 
ferable by  the  consignee,  nor  the  goods  deliverable  to 
his  order ;  that  his  endorsement  only  operated  as  an 
assignment  to  the  pledgee,  subject  to  the  higher  rights 
of  the  owner. '^ 

But  the  Court  went  on  and  passed  upon  the  statute 
of  Louisiana  which  assimilates  bills  of  lading  to  bills 
of  exchange  in  their  negotiability,  and  construed  the 
statute  in  a  manner  which  seems  to  destroy  it  alto- 
gether. And  this  brings  us  to  the  consideration  of  the 
question  full  of  importance  and  of  actuality,  to-wit : 
to  what  extent  are  bills  of  lading  neo:otiable? 

339.  By  the  Commercial  law,  bills  of  lading  are 
transferable  by  endorsement  and  delivery,  and,  there- 
by, either  the  special  property  or  the  full  ownership 
of  the  goods  they  cover  passes  to  the  transferee 
according  to  circumstances.  In  that  way  and  to  that 
extent,  bills  of  lading  are  negotiable,  or  they  are,  as 
commonly  said,  quasi-nQ^o\i2ih\e  securities.  But  they 
are  not  negotiable  to  the  extent  of  making  the  trans- 
feree   a   holder  for  value,  as  in  the  transfer  of  nego- 

*  Lallande  vs.  Creditors,  42  La.  An.  711, 


Pledge  of  Bills  of  Lading.  299 

tiable  paper,  and  of  cutting  off  the  equities  of  third 
persons.  Such  is  the  law  of  England  and  of  the 
United  States  generally.* 

340.  Mr.  Jones  states  the  rule  clearly  in  the  follow- 
ing words  :  "  The  rights  of  a  pledgee  to  a  bill  of  lad- 
ing by  indorsement  or  delivery  are  the  rights  of  the 
pledgee  of  the  property  itself  by  a  delivery  of  it.  A 
bill  of  lading,  though  negotiable  in  form,  is  not  a 
negotiable  instrument,  like  a  bill  of  exchange,  but  a 
symbol  or  representative  of  the  goods  to  which  it 
relates ;  and  the  rights  arising  from  a  transfer  of  a  bill 
of  lading  correspond,  not  to  those  arising  from  the 
transfer  of  a  negotiable  instrument^  but  to  those  aris- 
ing from  a  delivery  of  the  property  under  like  circum- 
stances." 

And  he  illustrates  the  principle  in  a  forcible  man- 
ner:  "  One  making  advances  upon  a  bill  of  lading  to 
one  who  is  not  the  owner  of  the  property  therein 
described,  acquires  no  right  of  property  therein.  Al- 
though possession  is  prima  facie  evidence  of  owner- 
ship, 3'et  that  alone  does  not  deprive  the  true  owner 
of  his  title.  Taking  possession  of  the  property, 
shipping  it,  obtaining  bills  of  lading  from  the  carriers, 
indorsing  away  the  bills  of  lading,  or  even  selling  the 
property  and  obtaining  a  full  price  for  it,  can  have  no 
effect  upon  the  rights  of  the  owner.  Even  a  bona 
fide  purchaser  obtains  no  right  by  a  purchase  from 
one  who  is  not  the  owner,  or  not  authorized  to  sell. 


*  Benjamin,  on  Sales,  Sec.  804  and  notes. 
Pollard  vs.  Vinton,  105  U.  S  ,  p  7. 


300  The  Law  op  Pledge. 

Therefore,  if  an  owner  of  cotton  authorized  another 
person  to  ship  it,  but  gives  the  agent  no  authority  to 
ship  it  in  his  own  name,  the  latter,  by  shipping  in  his 
own  name,  and  taking  a  bill  of  lading  accordingly, 
can  not,  by  negotiating  this,  charge  the  cotton  with  the 
payment  of  advances  made  on  the  faith  of  such  bill  of 
lading.''"^ 

341.  The  pledgee  of  a  bill  of  lading,  like  the  pur- 
chaser, has,  therefore,  the  same  right  to  the  goods 
that  he  would  have  if  they  were  actually  and  corpo- 
really transferred  to  him  ;  but  he  has  no  more  rights 
than  the  transferee  in  such  a  case  against  the  true 
owner. f 

We  find  consequently  in  the  bill  of  lading  what  we 
find  in  numerous  contracts  affecting  personal  or 
movable  property,  the  great  difference  between  the 
Common  law  and  the  Civil  law,  to-wit :  In  the 
former,  that  no  title  can  be  conveyed  to  such  property 
by  a  person  who  has  no  right  to  it ;  and,  in  the  latter, 
that  possession  of  such  property  is  equivalent  to  title, 

*  Jones,  on  Pledges,  Sees.  242.  244. 

t  Porter,  on  Bills  of  Lading.  Sees.  510,  401. 

Means  vs.  Bank.  146  U.  S.  627. 

Sewell  vs.  Burdick  et  als..  House  of  Lords,  Appeal  Cases,  1SS4- 
85,  p.  74. 

Richardsottvs.  Atlas  National  Bank  (La.),  A.  R. 

Bank  vs.  Meyer  &  Co.,  43  La.  An.  1. 

Turner  vs.  Israel  (Ark.)  41  S.    W.  806, 

Lewis  vs.  Springtield 'Banking  Company  (111.).  46  N.  E.  743. 

Ayres,  Weatherwax  &  Reed  Company  vs.  Dorsey  Produce  Com- 
pany (Iowa),  70  N.  W.  111. 

Union  Trust  Company  vs.  Trumbull  (111.),  27  X.  E.  24. 

Gil)  vs.  Kymer,  5  Moore,  503. 

Fielding  vs.  Kymer,  2  B  and  B.  639. 

Newsoni  vs,  Thornton,  6  East,  17;  2  Smith,  207. 

Guiehard  vs.  Morgan,  4  Moore,  36. 

Martini  vs.  Coles,  1  M.  and  S,  140. 

Colgate  &  Co.  vs.  Penn,  Co  .  120  N.  Y.  120. 


Pledge  of  Bills  of  Lading.  301 

and,   therefore,   that   the  possessor  may  convey  rights 
that  he  himself  has  not. 

342.  But  in  some  of  the  States  statutes  have  been 
passed  changing  the  commercial  law  in  that  respect 
and  extending  more  or  less  the  negotiability  of  bills  of 
lading. 

We  find  in  the  excellent  work  entitled  "American 
and  English  Encyclopedia  of  Law,"  the  following 
paragraph : 

"  Title  of  Pledgee.  /;/  General.  In  England 
and  in  many  of  the  States  of  the  Union,  by  statute, 
bills  of  lading  are  made  negotiable  and  placed  on  the 
same  footing  as  bills  of  exchange.  In  such  States  there 
is  no  doubt  that  the  pledgee,  holding  for  value  and  in 
good  faith  in  the  usual  course  of  business,  gets  an 
indefeasible  title  to  the  property  represented  by  the 
bill  of  lading.  But  leavingr  out  of  view  these  statu- 
tory  enactments,  where  the  bill  of  lading  is  regarded 
strictly  as  the  symbol  of  the  goods,  it  naturally  follows 
that  the  pledgee  of  the  bill  of  lading  has  no  more  title 
in  the  goods  than  he  would  if  the  goods  themselves 
were  delivered  :  that  is,  he  gets  only  the  title  that  the 
assignee  had."  * 

343.  Except  in  Maryland,  it  may  be  doubtful  that 
any  of  the  statutes  alluded  to  above  have  rendered 
bills  of  lading  negotiable  to  the  extent  of  bills  of 
exchange,  and  to  the  effect  of  rendering  an  assignee 
or  pledgee  a  liolder   for  value  ;  and    the  Courts  have 

*  Am.  and  Eng.  Ency.  of  Law,  Vol.  18,  p.  62^). 


302  The  Law  op  Pledge. 

been  very  loath  to  declare  bills  of  lading  negotiable 
to  the  full  extent. 

344.  As  to  England,  the  authors  of  the  Encyclope- 
dia of  Law  do  not  seem  to  be  as  accurate  in  their  state- 
ment as  the}'  are  generally.  Mr.  Benjamin,  in  his  treaty 
on  the  sale  of  personal  property,  a  high  authority  in 
English  law,  though  originally  a  citizen  and  lawyer 
of  Louisiana,  says,  in  commenting  upon  bills  of  lading 
in  England  as  affected  by  the  Victoria  statutes : 

"  The  first  point  to  be  noticed  is  that  a  bill  of  lading 
is  not  negotiable  in  the  same  sense  as  a  bill  of  ex- 
change,  and  that  therefore  the  mere  honest  possession 
of  a  bill  of  lading  endorsed  in  blank,  or  in  which  the 
goods  are  made  deliverable  to  the  bearer,  is  not  such 
a  title  to  the  goods  as  the  like  possession  of  a  bill  of 
exchange  would  be  to  the  money  promised  to  be  paid 
by  the  acceptor.  Tlie  endorsefnent  of  a  bill  ofladijig 
gives  no  better  rigid  to  the  goods  than  the  endorser 
himself  had  (except  in  cases  where  an  agent  eiitrusted 
with  it  may  transfer  it  to  a  bona  Jide  holder  under  the 
factors'  act) ,  so  that  if  the  owner  should  lose  or  have 
stolen  from  him  a  bill  of  lading  endorsed  in  blank, 
the  finder  or  the  thief  could  confer  no  title  upon  an 
innocent  third  person."  * 

In  Louisiana  the  statute  which  renders  bills  of 
lading  negotiable  reads  thus  : 

"Sec.  6.  Any  bill  of  lading  given  by  any  forwarder, 
boat,  vessel,  railroad,  transportation  or  transfer  com- 
pany,   may   be  transferred   by  endorsement  therein, 

*  Benjamin,  Sale  of  Personal  Property,  Sec.  864. 
Potter,  on  Bills  of  Lading,  Sec.  442. 


Pledge  of  Bills  of  Lading.  303 

and  any  person  to  whom  the  same  may  be  transferred 
shall  be  deemed  and  taken  to  be  the  owner  of  the 
goods,  wares,  merchandise,  grain,  tlour  or  other  pro- 
duce or  commodity  therein  specified,  so  far  as  to  give 
vaHdity  to  any  pledge,  lien  or  transfer  made  or  created 
by  such  person  or  persons." 

And  Sec.  9  of  the  same  law  says  that— 
"  All  receipts,  bills  of  lading,  vouchers  or  other 
documents  issued  by  any  cotton  press,  wharfinger, 
forwarder  or  other  person^  boat,  vessel,  railroad, 
transportation  or  transfer  company,  as  by  this  act 
provided,  shall  be  negotiable  by  endorsement  in 
blank,  or  by  special  endorsement,  in  the  same  man- 
ner and  to  the  same  extent  as  bills  of  exchange  and 
-promissory  notes  now  are.''"' 

The  intention  of  the  lawgiver  in  framing  this  stat- 
ute seems  clearly  to  assimilate,  almost  to  identify, 
bills  of  lading  to  bills  of  exchange  in  their  negotia- 
bility. The  statute  says  /;/  the  same  manner  and  to 
the  same  extent  as  bills  of  exchange.  With  such 
words  of  assimilation,  what  can  differentiate  them.^ 
An  assignee  or  a  pledgee  in  good  faith  of  a  bill  of 
lading  under  the  provisions  of  such  a  law  ought  to  be 
considered  a  holder  for  value  and  be  protected 
against  the  equities  of  third  persons.  Yet  the 
Court  of  Louisiana  has  decided  otherwise  in  the 
case  which  we  have  referred  to  above  of  Lal- 
lande  vs.  His  Creditors.  It  rested  its  judgment 
partly  upon  the  authority  of  the  case  of  Shaw  vs.  Rail- 
road Company,  loi   U.  S.  557.      But  the   decision  of 


304  The  Law  of  Pledge. 

the  Supreme  Court  of  the  United  States  rested  upon  a 
different  statute,  which  made  bills  of  lading  negotiable 
in  the  same  manner  as  bills  of  exchange  and  promissory 
notes,  but  not  to  the  same  extent,  as  does  the  Louisiana 
law.  The  Supreme  Court  of  the  United  States  in  that 
case  said,  speaking  of  the  effects  of  the  negotiability 
of  bills  of  exchange:  '^  If  these  were  intended  surely 
the  statute  would  have  said  something  more  than 
merely  make  them  negotiable  by  endorsement.  No 
statute  is  to  be  construed  as  making  an  innovation 
upon  the  common  law  which  it  does  not  fairly  express. 
Especially  is  so  great  an  innovation  as  would  be  plac- 
ing bills  of  lading  on  the  same  footing  in  all  respects 
with  bills  of  exchange,  not  to  be  inferred  from  words 
that  can  be  fully  satisfied  without  it." 

346.  The  words  of  the  Louisiana,  as  those  of  the 
Mar3-land  statute,  clearly  show  the  intention  of  the 
Legislature  that  the  transferee  in  good  faith  of  a  bill 
of  lading  should  be  held  a  holder  for  value,  free  from 
equities,  just  as  the  holder  of  a  bill  of  exchange.  It 
is  clearly  intended  for  the  greater  protection  and  pro- 
motion of  commerce.  Such  was  the  early  law  of  some 
of  the  countries  of  continental  Europe,  when  commerce 
first  dawned  out  of  the  darkness  of  barbarism,  and  so 
has  the  law  remained  in  those  countries  up  to  the 
present  day.     But  of  this  later. 

347.  The  Court,  in  the  Louisiana  case  of  Lallande 
vs.  His  Creditors,  was  evidently  influenced  in  its 
judgment  by  the  fact  that  the  pledgeor  of  the  bill  of 
lading  was  a  factor  pledging  his   principal's  property 


Pledge  of  Bills  of  Lading.  305 

to  secure  his  own  debt,  in  violation  of  the  law  of  the 
State.  But  the  real  question  was  wliether  the  bill  of 
lading  was,  or  not,  negotiable  paper.  If  it  were,  the 
quality  of  factor  in  the  pledgeor  disappeared  in  the 
case.  If,  instead  of  a  bill  of  lading,  the  factor  has 
pledged  for  his  own  debt  and  fraudulently  a  bill  of 
exchange  or  a  promissory  note,  belonging  to  his  prin- 
cipal, and  the  pledgee  had  taken  it  in  good  faith, 
before  maturity,  for  value  and  in  the  usual  course  of 
business,  would  not  such  pledgee  have  a  good  title 
against  the  true  owner?  Clearly  so.*  In  a  previous 
case,  in  which  the  bill  of  lading  was  not  transferred 
by  a  factor,  the  Court  recognized  its  negotiability 
under  the  same  statute. f 

348.  The  Court  of  Louisiana,  in  deciding  the  Lal- 
lande  case  and  relymg  upon  the  judgment  of  the 
Supreme  Court  of  the  United  States  in  Shaw  vs. 
Railroad  Company,  says:  "  In  the  case  of  Shaw  vs. 
Railroad  Compan}-,  loi  U.  S.  557,  the  Supreme 
Court  considered  the  effect  of  an  endorsement  of  a 
bill  of  lading  which  was  made  U7ider  a  similai'  act  to 
that  of  1868,  and  they  said  :  '  It  does  not  necessarily 
follow,  therefore,  that  because  a  statute  has  made  bills 
of  lading  negotiable  by  endorsement  and  delivery,  all 
the  consequences  of  an  endorsement  and  delivery  of 
bills  and  notes  before  maturity  ensue,  or  are  intended 
to  result  from  such  negotiation.'  "    The  Court  of  Lou- 


'  Kent,  Comtn.,  VoL  2.  Sec.  627. 
+  Delgado  &  Co.  vs.  Wilbur  &  Co.,  25  La.  An.  82. 
London  Joint  Bank  vs.  Simmons,  House  of  Lords,  Appeal  Cases, 
1892.  p.  201. 


306  The  Law  of  Pledge. 

isiana  was  clearly  in  error  in  stating  that  the  statute  of 
Louisiana  was  similar  to  that  of  Missouri,  under  which 
the  bill  of  ladinof  in  the  Shaw  case  was  made.  The 
Missouri  statute  simply  provided  that  "  bills  of  lading 
shall  be  negotiable  by  written  endorsement  thereon 
and  delivery,  in  the  same  manner  as  bills  of  exchange 
and  promissory  notes."  The  Louisiana  statute  goes 
much  farther  and  says  that  they  "  shall  be  negotia- 
ble by  endorsement  in  blank  or  by  special  endorse- 
ment in  the  same  manner  and  to  the  same  extent  as 
bills  of  exchange  and  promissory  notes  now  are."  The 
words /<?  the  sa?ne  extent  cert^xnly  destroys  the  similarity 
between  the  two  laws.  Had  the  Missouri  statute 
contained  those  words  the  decision  of  the  Supreme 
Court  of  the  United  States  might  have  been  different. 
But  even  under  the  Missouri  law  the  dicta  in  the 
Shaw  case  seems  to  have  taken  a  wider  range  than 
the  question  demanded.  The  opinion  says  :  "  Bills  of 
lading  are  regarded  as  so  much  cotton,  grain,  iron  or 
other  articles  of  merchandise.  The  merchandise  is 
very  often  sold  or  pledged  by  the  transfer  of  the  bills 
which  cover  it.  They  are,  in  commerce,  a  very  differ- 
ent thing  from  bills  of  exchange  and  promissory  notes, 
answering  a  different  purpose  and  performing  differ- 
ent functions.  It  can  not  be,  therefore,  that  the  statute 
which  made  them  negotiable  by  endorsement  and  deliv- 
ery or  negotiable  in  the  same  manner  as  bills  of  ex- 
change and  promissory  notes  are  negotiable,  intended 
to  change  totally  their  character,  put  them  in  all  respects 
on  the  footing  of  instruments  which  are  the  represen- 


Pledge  op  Bills  of  Lading.  307 

tatives  of  money,  and  change  the  negotiation  of  them 
with  all  the  consequences  which  usually  attend  or  fol- 
low the  negotiation  of  bills  and  notes.  Some  of  these 
consequenceswouldbevery  strange,  if  notimpossible."* 

349.  But  the  object  of  such  a  law  is  simply  to 
make  of  the  transferee  of  a  bill  of  lading  a  holder  for 
value  and  cut  off  the  equities  of  the  true  owner,  just 
as  in  the  case  of  a  transferee  of  a  bill  of  exchange  or 
promissory  note  ;  in  other  words,  to  render  bills  of 
lading  negotiable  paper.  Can  not  the  statutory  law 
do,  in  that  respect,  for  bills  of  lading  what  the  Com- 
mon law,  the  mere  law  of  custom,  has  done  for  the 
ordinary  negotiable  paper?  The  statute  of  Maryland 
has  rendered  bills  of  lading  fully  negotiable,  as  we 
will  see  presently.  It  is  the  law  in  France  and  other 
continental  countries  of  Europe,  under  a  different 
system.  It  is  the  old  commercial  law  of  the  oldest 
commercial  states  of  Europe.  The  reason  of  such  a 
rule,  where  it  exists,  is  the  same  as  the  reason  of  the 
negotiability  of  bills  of  exchange  and  promissory 
notes,  to  promote  commerce  by  facilitating  tinancial 
operations. 

350.  In  an  important  case  in  Louisiana,  arising 
under  the  statute  which  made  bills  of  lading  nego- 
tiable and  the  bona  fide  transferee  a  holder  for  value, 
there  were  dissenting  opinions  of  two  Justices  out  of 
five,  who  contended  that  the  law  should  be  given  its 
full  effect.  One  of  them  said :  "  Nor  am  I  disposed 
to  perplex  myself  with  the  long  discussions  and  subtle 

♦  Shaw  vs.  Railroad  Co.,  101  U.  S..  56.5. 


308  The  Law  of  Pledge. 

distinctions  of  the  writers  on  this  subject.  I  think  the 
statutes  of  our  own  State  indicate  with  clearness  the 
line  of  decision  for  us.  The  act  of  1868,  No.  150, 
after  forbidding  the  execution  of  warehouse  receipts  or 
bills  of  lading-  for  goods  or  merchandise,  unless  the 
same  shall  have  been  actually  delivered  or  shipped, 
and  denouncing  heavy  penalties  for  violation  of  the 
prohibition,  extending  even  to  punishment  for  five 
years  in  the  penitentiar}^,  proceeds  in  its  sixth  section 
to  provide  that  the  holder  of  such  receipts  or  bills  of 
lading  shall  be  deemed  and  taken  to  be  the  owner  of 
the  merchandise  described  therein.  Section  9  pro- 
vides that  *  all  receipts,  bills  of  lading,  vouchers  or 
documents  issued  by  any  *  *  *  boat,  vessel  or 
uailroad  *  *  *  ^  as  by  this  act  provided,  shall  be 
negotiable  by  endorsement  in  blank,  or  by  special 
endorsement,  in  the  same  manner  and  to  the  same 
extent  as  bills  of  exchange  and  promissory  notes  now 
are.'  The  animus  of  this  statute  is  unmistakable.  It 
was  intended  to  protect  both  the  carriers  and  the  pub- 
lic— the  former  by  punishing  any  persons  in  their  em- 
plo}^  for  issuing  false  bills  of  lading  or  receipts,  and 
the  latter  by  putting  such  bills  or  receipts  upon  the 
same  footing  as  commercial  paper,  and  protecting  the 
holder  in  goodfaith  with  all  the  privileges  and  immu- 
nities given  to  bills  of  exchange  and  promissory  notes." 
351.  The  other  dissenting  Justice  in  that  case  said 
of  the  same  statute :  ' '  To  decide  the  question  pre- 
sented it  is  useless,  it  seems,  to  refer  to  the  jurispru- 
dence of   other  States  ;    we  have  but  to  open  and  read 


Pledge  of  Bills  op  Lading.  309 

the  statute  of  1868.  It  was  enacted  for  the  express 
purpose  of  fixing,  in  and  for  Louisiana,  the  legal 
value  of  a  bill  of  lading.  With  the  provisions  of  that 
law  planters  and  merchants  are  now  conversant.  The 
bill  of  lading  has  the  value  of  a  sale,  the  stipulation  of 
which  can  not  be  changed,  can  not  be  limited,  except 
in  one  way,  that  indicated  in  the  statute  ;  that  is, 
by  the  words  '''not  negotiable''''  plainly  written  or 
stamped  on  its  face.  The  law  of  1868  was  enacted 
in  the  interest  of  commerce ;  it  created  one  of  the 
most  important  branches  of  our  credit ;  it  secures  the 
most  legitimate  transactions ;  it  sanctioned,  legalized 
and  protected  a  fair  but  imperfect  custom  which  pre- 
vailed before  its  adoption,  and  it  is  by  far  wiser  and 
more  equitable  than  the  vacillating  and  doubtful  juris- 
prudence of  other  States."  * 

Between  the  decision  of    the    Court   in  that   case 
which   virtually  nullified   the  law  as  to  the   negotia- 
bility of  bills  of   lading,  and  the  dissenting   Opinions, 
we  would  say  that  the  better   judgment  is  sometimes 
with  the  minority. 

352.  The  Maryland  statute  is  framed  in  the  follow- 
ing words  :  "  All  bills  of  lading  and  all  receipts,  vouch- 
ers or  acknowledgments  whatsoever,  in  writing,  in  the 
nature  or  stead  of  bills  of  lading  for  goods,  chattels  or 
commodities  of  any  kind,  to  be  transported  on  land  or 
water,  or  on  both,  which  shall  be  executed  in  this 
State,  or  being  executed  elsewhere,  shall  provide  for 

*  Hunt  &  Macauley  vs.  Railroad  Co.,  29  La.  An.  4(>2  and  4G4. 


310  The  Law  of  Pledge. 

the  delivery  of  goods,  chattels  or  commodities  of  any 
kind  within  this  State ;  and  all  warehouse,  elevator  or 
storage  receipts  whatever  for  goods,  chattels  or  com- 
modities of  an}''  kind  stored  or  deposited,  or  in  said 
receipts  stated  or  acknowledged  to  be  stored  or  depos- 
ited for  any  purpose  in  any  warehouse^  elevator  or 
other  place  of  storage  or  deposit  in  this  State,  shall  be 
and  they  are  hereby  constituted  and  declared  to  be 
negotiable  instruments  and  securities,  unless  it  be  pro- 
vided in  express  terms  to  the  contrary  on  the  face 
thereof,  in  the  same  sense  as  bills  of  exchange  or  prom- 
issory notes,  and  full  and  complete  title  to  the  prop- 
erty in  said  instruments  mentioned  or  described,  and 
all  rights  and  remedies  incident  to  such  title  or  arising 
under  or  derivable  from  the  said  instruments,  shall 
inure  to,  and  be  vested  in,  each  and  every  bona  fide 
holder  thereof  for  value,  altogether  unaffected  by  any 
rights  or  equities  whatsoever  of  or  between  the  original 
or  any  other  prior  holder  of  or  parties  to  the  same, 
of  which  such  bona  fide  holder  for  value  shall  not 
have  had  actual  notice  at  the  time  he  became 
such."* 

This  law  was  construed  b}-  the  Court  of  Maryland, 
as  it  must  necessarily  be,  to  mean  that  bills  of  lading 
in  the  cases  provided  for  are  negotiable  paper  in  the 
fullest  sense  of  the  law  merchant,  and  that  the"  holder 
thereof  for  value  and  without  notice  of  existing 
equities,    is   entitled   to    the  goods   the  bills  of  lading 

*  Maryland"?  Rev.  Code  1878,  p,  298. 


Pledge  of  Bills  op  Lading,  311 

cover,  even  against  the  true  owner.  In  that  case,  the 
bills  of  lading  were  drawn  in  St.  Louis,  covering 
goods  to  be  delivered  in  Baltimore,  and  were  held  by 
a  holder  in  good  faith,  though  they  were  fraudulently 
pledged  by  the  agent  of  the  owner  of  the  goods. 
The  Court  recognized  the  full  negotiability  of  the 
bills  of  lading  under  the  statutes  of  Maryland.  The 
Court  held  also  that  an  antecedent  debt  of  the  pledgeor 
was  a  valid  consideration  for  the  pledge  under  the 
terms  of  the  statute,  contrarily  to  the  rule  of  some  of 
the  States.* 

It  may  well  be  said  that  Mar3'land  is  so  far  the  onl}' 
State  of  the  Union  in  which  bills  of  lading  are  nego- 
tiable paper  to  the  fullest  extent. 

353.  The  California  statute  is  in  these  words: 
"  All  the  title  to  the  freight  which  the  first  holder  of 
a  bill  of  lading  had  when  he  received  it,  passes  to 
every  subsequent  endorsee  thereof  in  good  faith  and 
for  value,  in  the  ordinary  course  of  business,  with 
like  effect  and  in  like  manner  as  in  the  case  of  a  bill 
of  exchange,  "f 

This  law  does  not  make  a  bill  of  lading  as  fully 
negotiable  as  a  bill  of  exchange,  because  the  trans- 
feree or  pledgee  only  gets  such  title  as  the  original 
holder  of  the  bill  himself  had  to  the  goods ;  and  the 
true  owner's  equities  are  not  cut  off  by  the  transfer. 

The  Wisconsin   statute  has   not  established  either 


*  Tiedman  vs.  Knox,  53  Md,  612. 

Parsons,  Maritime  Law,  Vol.  1,  p.  133. 
t  California  Civil  Code,  Art.  2127. 


312  The  Law  of  Pledge. 

the   full   negotiability  of  bills   of  lading,  as   shown  by 
the  Court  of  that  State.* 

354.  It  is  a  necessary  consequence  of  such  absolute 
negotiability  of  bills  of  lading  and  of  the  fact  that 
their  transferees  in  good  faith  are  holders  for  value, 
free  from  all  equities,  that  such  holders  are  entitled  to 
the  goods  covered  by  the  bills  of  lading  even  against 
the  true  owners.  .  And  the  rule  obtains  whether  the 
transferees  are  purchasers  and  therefore  owners  of  the 
bills,  or  simpl}'  pledgees. 

355.  It  seems  clear  from  the  foregoing  authorities 
that,  in  England  and  in  the  United  States,  excepting 
the  State  of  Maryland,  the  endorsee  of  a  bill  of  lading 
has  no  other  ri^ht  to  the  goods  than  his  endorser 
had ;  and  that  he  is  not  a  holder  for  value,  free  from 
the  equities  of  the  true  owner.  It  follows,  therefore, 
that  the  pledgee  of  a  bill  of  lading  has  no  claim,  as 
such,  over  the  goods,  when  his  pledgeor  is  not  the 
true  owner,  or  had  no  right  to  pledge  the  bill  of 
lading. 

There  are  exceptions  to  the  rule  both  in  England 
and  in  the  United  States,  such,  for  instance,  as  when 
the  true  owner  has  put  on  his  agent,  or  some  other 
person,  the  indicia  of  ownership,  thereby  enabling 
him  to  deceive  third  persons  dealing  with  him  on  the 
faith  of  such  marks  of  ownership. 

In  such  cases,  the  pledgee  in  good  faith  of  the  bill 
of  lading    is   entitled  to   the  goods   even   against  the 


Wisconsin,  Rev.  Stat.  Sec.  4425. 
Rice  vs.  Cutter,  17  Wis.  351,  358. 


Pledge  of  Bills  of  Lading.  313 

true  owner,  who  must  suffer  the  consequences  of  his 
ill-placed  confidence,  as  in  all  dispositions  of  property 
by  an  unfaithful  but  authorized  asent.* 


Benjamin,  on  Sales,  3d  Am.  Ed.  p.  19  and  notes. 
Am.  and  Eng.  Ency.  of  Ijaw,  Vol,  18,  p.  634. 
Conner  vs.  Crengham,  77  X.  Y.  391. 
Daws  vs.  Kidder,  84  N.  Y.  121. 
rotter,  on  Bills  of  Lading,  Sec.  470. 
HoQold  vs.  Meyer  et  al.,  3G  La.  An.  58.5. 
Conner  vs.  Hill,  0  La.  An.  8. 
Moore  vs.  Lambeth,  5  La.  An.  73. 


CHAPTER    XXX. 
Bills  of  Lading  in  the  Civil  Law. 

356.  The  law  is  different  on  this  subject  in  France, 
Italy,  Belgium  and  other  Civil  law  countries  of  con- 
tinental Europe.  From  the  early  dawn  of  the  Com- 
mercial law  in  those  countries,  during  the  middle 
ages,  a  bill  of  lading  represented  both  the  title  and 
the  possession  of  the  goods  it  covered,  and  the  en- 
dorsement and  delivery  of  it  effected  the  transfer  of 
the  title  and  of  the  possession.  The  transfer  of  the 
bill  of  lading  for  value  to  a  party  in  good  faith  defeated 
the  rights  of  even  the  true  owner  of  the  goods.  The 
bill  of  lading  had  then  and  there,  consequently,  the 
elements  of  full  negotiability.  This  was  the  rule 
without  any  legislation  to  that  effect  and  from  the 
mere  force  of  usage,  Troplong  says  that  this  prin- 
ciple is  fundamental  and  innate  in  the  interest  of  com- 
merce, which  has,  from  the  beginning,  subsisted  upon 
it,  and  he  cites  in  support  of  this  assertion  Casaregis 
and  Valin,  the  great  oracles  of  the  early  Commercial 
law.  " 

357.  As  to  the  claim  of  the  true  owner  of  goods 
pledged  fraudulently  by  the  consignee  to  a  pledgee 
in  good  faith,  Troplong  says  also,  supporting  himself 
by  the  great  names  of  Casaregis  and  Deluca :  "  And, 
indeed,  where  would  commerce  be  when  it  is  so  nec- 

*  Troplong,  Nantissement,  Sees.  323  and  324. 

315 


316  The  Law  of  Pledge. 

essary  that  business  should  be  transacted  rapidly, 
when  negotiations  once  commenced  can  not  be  put  in 
question  ;  how  would  matters  stand  if  it  were  permit- 
ted to  contend  that  such  goods  which  have  been  sold, 
delivered,  pledged,  do  not  belong  to  him  who  has 
disposed  of  them?''  * 

And  he  continues:  "  The  concordance  of  the  Civil 
law  and  the  Commercial  law  is  manifest  here.  They 
fortify  and  enlighten  each  other."  f 

About  the  principle  that  the  law  should  protect  the 
owner  of  goods  fraudulently  pledged  a  non  domino^ 
even  to  a  third  person  in  good  faith,  Troplong 
remarks  again:  "  But,  says  Casaregis,  the  usages  of 
commerce  can  not  accede  to  those  ideas.  '  Hcec 
nullatemis  -procedere  iJiter  mercatores ,  quia  de  eorum 
universali  stylo  aut  consetuedine,  contrarium  ser- 
vatur.''  This  custom  is  certified  to  by  Marquardus  ; 
it  is  consecrated  by  several  local  statutes  in  Europe ; 
Cardinal  Deluca  recognizes  its  existence  and  approves 
of  it.  Commercial  faith  thus  demands  it.  When  the 
possessor  of  movable  property  which  he  holds  from 
his  correspondent  sells  it  against,  the  will  of  the 
latter,  or  without  his  knowledge,  or  delivers  it  to  a 
third  person  in  good  faith  for  a  valuable  consideration, 
he  who  receives  it  from  the  jxjssessor  has  the  right  to 
retain  it.  '  Et  similiter^  ob  earn  rationem  non  tur- 
banda  libertatis  cominercii,  in  diibitabitio7iibus  ter- 
minis,    nempe   mercatoris^   vel   ^na^istrl    navis,    vel 


*  Troplong  Nantissement,  Sec.  76. 
t  m..  Ibid.,  Sec.  78. 


Bills  of  Lading  in  Civil  Law.  317 

vectoris,  mala  fide  alienantis^  vel  distrahentis^  seu  dis- 
ponentis  de  rebus  aut  mercibtis  seu  respective  corre- 
sponsoris  principalis^  contra  illius  mentem^  seu  or  di- 
xies: quod  alter  mercator  illorum  emptor^  seu  acquis- 
itor  ex  aliquo  titulo  07ieroso,  non  tenetur  domino  illos 
restituerCy  nisi  sibi  persoluto  tali  pretio,  firmat  car'- 
di7ialis Deluca;  Deregalib.  decis.  115,  No.  5  and  6.' 
It  is  otherwise,-of  course,  when  the  purchaser  is  in  bad 
faith.  But  if  he  is  in  good  faith,  the  commercial  law 
is  in   his  favor."  * 

The  pledgee  is  in  that  respect  exactly  in  the  same 
position  as  the  purchaser. f 

358.  This  principle,  established  first  by  usage  for 
the  necessities  of  commerce,  has  passed  into  the  leg- 
islation and  the  jurisprudence  of  those  same  countries. 
The  French  Code  of  Commerce,  amended  by  a  law 
of  1872,  provides  that:  "  In  all  cases  the  lien  subsists 
on  the  pledge  only  if  the  pledge  has  been  placed  and 
has  remained  in  the  possession  of  the  creditor  or  of  a 
third  person  agreed  upon  between  the  parties.  The 
creditor  is  reputed  having  the  goods  in  his  possession 
when  they  are  at  his  disposition  in  his  stores  or  on  his 
ships,  at  the  custom  house  or  in  a  public  warehouse,  or 
if,  before  they  have  arrived^  he  has  the  possession  0/ 
them  by  a  bill  of  lading.''''  J 


*  Troplong,  Nantissement.  Sec.  76. 
t  Id.,  Ibid.,  Sec.  74. 

Baudry-Lacantinerie,  Nantissement,  Sec.  31. 

Laurent,  Nantissement,  Sees.  440,  441. 

Pont,  Nantissement,  Sec.  1073. 
+  French  Code  of  Commerce.  Art.  92. 


318  The  Law  of  Pledge. 

359.  The  holder  of  the  bill  of  lading  is  entitled  to 
the  possession  and  ownership  of  the  goods.  Let 
us  cite  Toplong  again  : 

'*  The  holder  of  the  bill  of  lading  has  the  right  to 
demand  that  the  goods  be  delivered  to  him,  and  it  is 
not  allowed  to  raise  against  him  the  question  of  oxvn- 
ershi-p.  He  alone  is  the  legal  consignee.  It  is  what 
Casaregis  establishes  admirably.  And  it  is  because 
the  bill  of  lading  gives  the  holder  the  exclusive  right 
to  receive  the  goods  ;  it  is  because  the  bill  of  lading 
is  the  only  document  by  virtue  of  which  the  goods 
can  be  delivered,  that  the  law  considers  the  possession 
of  the  bill  of  lading  as  the  possession  of  the  goods."  * 

An  important  case,  directly  in  point,  was  decided 
by  the  Court  of  Cassation  since  the  da^'s  of  Troplong, 
in  which  the  pledgee  in  good  faith  of  a  bill  of  lading 
was  decreed  to  be  entitled  to  the  goods  against  the  true 
owner,  though  they  were  pledged  against  his  will  by 
a  dishonest  agent,  f 

360.  The  Commercial  law  of  these  countries  agrees 
perfectl}'  on  this  subject  as  we  see  with  the  principle 
of  the  French  law,  of  which  we  have  already  spoken, 
to-wit :  that  personal  or  movable  property  has  no 
following — ATobilia  non  habent  sequellam  '^  and  that, 
therefore,  the  possession  of  such  property  is  equiva- 
lent to  title.      The  bill  of  lading-  constitutins^   incon- 


*  Troplong,  Xantissement,  Sec.  323. 

t  Court  of  Cassation,  1871,  p.  148,  Banque  de  Martinique  vs. 
Thomas  and  others.  The  Reporter  of  the  Decision  remarks 
that  the  Court  proclaimed  with  great  energy  the  principle  that 
the  pledgee  in  good  faith  of  a  bill  of  lading  must  be  protected 
against  the  claim  of  the  true  owner  defrauded  by  an  unfaith- 
ful agent. 


Bills  of  Lading  in  Civil  Law.  319 

testable  possession  of  the  goods,  and  possession  being 
equivalent  to  title  under  the  French  law,  the  pledgee 
of  the  bill  has  a  right  paramount  to  that  of  the  true 
owner. 

There  is,  therefore,  on  this  point  of  the  negotiabil- 
ity of  a  bill  of  lading  and  of  the  legal  effect  of  the 
transfer  to  a  bona  fide  holder  for  value,  the  widest 
difference  between  the  law  of  the  United  States  and 
England,  on  one  side,  and  of  France,  Italy,  Belgium 
and  Holland,  as  well  as  of  Maryland,  on  the  other. 

361.  The  consequences  of  this  difference  in  case  of 
a  bill  of  lading  issued  in  France  of  goods  to  be  deliv- 
ered in  New  York,  or  vice  versa,  may  be  of  great  im- 
portance. And  here  the  question  would  present  itself, 
which,  in  the  case  of  Shaw  vs.  Railroad  Company, 
loi  U.  S.,  p.  557,  the  Supreme  Court  of  the  United 
States  said  it  was  useless  to  examine,  because  the 
laws  of  the  two  States,  Missouri  and  Pennsylvania, 
from  which  and  to  which  the  bill  of  lading  was  issued, 
were  the  same  on  that  subject.*  That  question  would 
be,  in  one  of  its  phases,  whether  a  bill  of  lading,  so 
far  as  the  transferee  is  concerned,  is  to  be  governed 
in  its  negotiability  by  the  law  of  the  place  where  it  is 
issued  or  made,  or  by  the  law  of  the  place  where  the 
goods  that  it  covers  are  to  be  delivered ;  in  other 
words,  whether  the  bona  fide  holder  of  a  French  bill 
of  lading  would  be  recognized  in  New  York  as  enti- 
tied  to  the  goods  against  the  true  owner,  if  they  were 
fraudulently    pledged    by    a  factor ;  and  whether  the 

*  Shaw  vs.  Railroad  Company,  101  U.  S.  SO'i. 


320  The  Law  of  Pledge. 

bona  fide  holder  of  an  American  bill  of  lading  would 
be  recognized  in  France  as  entitled  to  the  goods 
against  the  true  owner  under  similar  circumstances. 

362,  The  Court  of  Louisiana  also  said  that  it  was 
useless  to  examine  that  question  in  a  case  where  the 
bill  of  lading  was  made  in  one  State  and  the  goods 
were  to  be  delivered  in  another  State,  for  the  like 
reason  that  the  laws  of  the  two  States  were  the  same 
on  that  subject.  The  Court  used  similar  language  to 
that  of  Shaw  vs.  Railroad  Company,  and  said  :  "  The 
bill  of  lading  was  signed  in  the  State  of  Mississippi  and 
the  cotton  was  to  be  delivered  at  the  city  of  New  Or- 
leans. We  are  not  troubled  with  any  question  of  the 
conflict  of  laws  ;  because  we  are  not  advised  that  the 
law  of  Mississippi  differs  from  our  own,  and  the  legal 
presumption  is,  and  we  must  act  upon  it,  that  the  law 
of  that  State  is  like  our  own  in  any  given  case  where 
the  controversy  is  not  shown."* 

363.  In  both  cases  it  is,  therefore,  clearly  acknowl- 
edged that  there  would  be  a  question  as  to  which  law 
should  govern,  if  the  law  of  the  State  where  the  bill 
of  lading  is  made  and  the  law  of  the  State  where  the 
goods  are  to  be  delivered  were  not  the  same.  Having 
shown  how  different  in  that  respect  the  law  of  France 
and  other  countries  in  Europe,  as  well  as  the  law  of 
Maryland,  is  from  the  law  of  the  several  States  of  the 
Union  and  of  England,  let  us  now  look  into  that  ques- 
tion. We  have  no  pretensions  to  solve  it.  We  will 
hardly  do  more  than  indicate  it. 

*  Hunt  it  McCaulaj'  vs.  Railroad  Company,  29  La.  An.  45S. 


CHAPTER  XXXI. 

364.  A  bill  of  lading  is,  at  the  same  time,  a  receipt 
for  the  goods  and  a  promise  to  carry  and  deUver 
them ;  consequently,  it  is  a  contract  as  well  as  a 
receipt ;  a  contract  entered  into  at  one  place  and  to 
be  executed  or  performed  at  another  place.*  The 
rule  is,  in  such  cases,  that  it  is  the  law  of  the  place  of 
performance  which  is  to  govern  the  rights  of  the  par- 
ties under  the  contract. f 

In  the  contract  of  the  bill  of  lading  the  place  of 
performance  would  seem  to  be  clearly  where  the 
goods  are  to  be  delivered.  The  contract  is  entered 
into  where  the  bill  is  drawn,  but  the  obligation  of  the 
carrier  is  to  deliver  tliem  to  the  consignee  at  the  place 
where  the  latter  resides  ;  the  place  of  delivery  is  pre- 
sumably, therefore,  the  place  of  performance.  As  the 
contract  is  to  be  construed  and  executed  under  the  law 
of  the  place  of  performance,  the  lex  loci  solutionis^ 
it  would  seem  clear  then  that  a  bill  of  lading  issued  in 
New  York  for  goods  to  be  carried  and  delivered  in 
France  should  be  governed,  as  to  the  rights  of  the 
holder  of  the    bill,  by   the    French  law,  and   that  the 

*  The  Thames,  14  Wall.  98. 

The  Delaware,  Ibid.  579. 

Pollard  vs.  Vinton,  15  U.  S,  7. 

Porter,  on  Bills  of  Lading,  Sec.  ()3. 
t  Story,  Conflict  of  Laws,  Sec.  280  et  seq. 

Wharton,  Conflict  of  Laws,  Sec.  398  et  seq. 

Savigny,  Roman  Law,  Vol.  8,  p.  203  et  seq. 

Cox  vs.  U.  S.,  G  Pet.  172. 

Andrews  vs.  Pond.  13  Pet.  G5. 

Scudder  vs.  Bank.  91  U.  S.  40G. 

321 


322  The  Law  of  Pledge. 

bona  fide  transferee  and  holder  of  the  bill  would  be 
entitled  to  the  goods,  even  against  the  true  owner, 
in  case  the  bill  was  fraudulently  disposed  of  by  his 
agent. 

For  the  same  reason  a  bill  of  lading  issued  in  France 
for  goods  to  be  delivered  in  New  York  should  be  gov- 
erned in  respect  to  the  holder  by  the  law  of  the  State 
of  New  York ;  and  the  true  owner  of  ihe  goods  ought 
to  defeat  the  claims  of  a  holder  for  value  and  in  good 
faith  of  the  bill  of  lading,  if  the  latter  was  disposed 
of  contrarily  to  the  owner's  orders.  And  the  same 
principle  and  rule  should  apph'  to  bills  of  lading 
issued  in  Baltimore  on  New  York,  or  issued  in  New 
York  on  Baltimore. 

365.  If  we  are  mistaken  in  this  view  of  the  ques- 
tion and  a  contrary  opinion  should  prevail,  the  con- 
flict of  law  would  still  exist,  but  in  a  contrary  sense, 
in  the  supposed  cases  in  which  the  bills  of  lading  are 
issued  under  a  law  different  from  that  of  the  country 
where  the  goods  are  to  be  delivered.  Then  the  bill 
issued  in  France  for  goods  to  be  delivered  in  New 
York  would  be  governed  by  the  law  of  France,  the 
lex  loci  co?tiractiiSj  and  again  the  true  owner  of  the 
goods  would  yield  to  the  claims  of  the  bona  Jide 
pledgee.  And  the  bill  of  lading  issued  in  New  York 
for  goods  to  be  delivered  in  France  should  be  gov- 
erned also  by  the  lex  loci  contractus^  and  the  true 
owner  then  would  defeat  the  pledgee. 

366.  It  has  been  held  in  some  cases  that  a  bill  of 
lading  is  a  contract  of  the   place  where   it  is  issued, 


Bills  of  Lading  in  Civil  Law.  323 

and  not  of  the  place  where  the  goods  are  to  be  deHv- 
ered,  and  that  the  rights  of  the  holder  or  transferee 
are  to  be  governed,  in  consequence,  by  the  law  of  the 
former  place.  The  reasons  of  this  doctrine  are  sub- 
stantially, that  the  bills  in  the  cases  in  question  were 
transferred  as  security  for  advances  made  at  the  domicil 
of  the  parties,  to  be  refunded  there,  and  that  the  bills 
were,  therefore,  only  a  mode  of  reimbursement.  The 
intention  of  the  parties  was  to  vest  the  title  in  the 
goods  in  the  pledgees  or  transferees  of  the  bills,  under 
the  law  of  their  domicil ;  and  the  Courts  held  that 
this  principle  disposed  of   the  cases. ■^'' 

It  is  true  also  that  it  has  been  generally  decided  that 
contracts  with  common  carriers  for  the  shipment  of 
goods  from  one  State  or  country  to  another  are  gov- 
erned by  the  lex  loci  contractus^  unless  the  intention 
of  the  parties  was  that  the  reverse  should  be  the  rule 
between  them.  The  jurisprudence  in  question  has 
simply  established  that  in  the  case  alluded  to,  presum- 
ably the  parties  intended  that  their  agreement  should 
be  according  to  the  law  of  the  place  where  they 
entered  into  the  contract,  f 

367.  The  Supreme  Court  of  the  United  States  has 
stated  the  rule  in  these  words:  "  This  review  of  the 
principal  cases  demonstrates  that,  according  to  the 
great  preponderance  if   not  the   uniform   concurrence 

*  Bank  of  Toledo  vs.  Shaw  ct  «/.,  Gl  X.  Y.  293. 

Bank  of  Rochester  vs.  Jones,  4  N.  Y.  497. 

Allen  vs.  Williams,  12  Tick.  297. 

City  Bank  vs.  R.  R.  Co.,  44  N.  Y.  13(3. 

Rawls  vs.  Deshler,  3  Keyes,  572. 
t  Dicey,  Contlict  of  Laws,  with  Am.  notes,  p.  581. 

Wharton,  Conllict  of  Laws,  Sec.  471. 


324  The  Law  of  Pledge. 

of  authority,  the  general  rule  that  the  nature,  the 
obligation  and  the  interpetation  of  a  contract  are  to 
be  governed  by  the  law  of  the  place  where  it  is  made, 
unless  the  parties  at  the  time  of  making  it  have  some 
other  law  in  view,  requires  a  contract  of  affreightment, 
made  in  one  country  between  citizens  or  residents 
thereof,  and  the  performance  of  which  begins  there, 
to  be  governed  bv  the  law  of  that  country,  unless  the 
parties  when  entering  into  the  contract  clearly  mani- 
fest a  mutual  intention  that  it  shall  be  governed  by  the 
law  of  some  other  countrs'/'^ 

368.  Wharton  on  this  point  says:  "  When  goods 
are  given  to  a  carrier  for  safe  carriage,  by  what  law  is 
the  contract,  so  far  as  its  intrinsic  conditions  are  con- 
cerned, to  be  mterpreted?  To  this  question  a  common 
answer  has  been,  ''  the  Jex  loci  contractus.'''  If  we 
examme  the  cases,  however,  appearing  to  sanction 
this  answer  we  wdl  find  that  in  all  of  them  the  place 
of  contract  was  the  place  of  the  carrier's  principal 
of^ce.-'  t 

369.  We  need  go  farther,  however,  in  the  considera- 
tion of  this  subject,  because  the  question  which  occu- 
pies us  is  not  only  that  of  the  relative  rights  and  obli- 
gations of  the  shipper  and  common  carrier  as 
arising  from  the  original  contract  between  them,   but 


*  Liverpool  Steain  Co.  vs.  Phoenix  Insurance  Company,  129  U.  S.  458. 

Peninsular  &  O.  Co.  vs.  Shand,  3  31oore.  P.  C  (X.  S.)  272,  290. 

Lloyd  vs.  Guibert,  6  B.  &  S.  100;  S.  C.  L.  R.  1  Q.  B.  115. 

Pope  vs.  Nickerson,  3  Story,  465. 

Jacobs  vs.  Credit  Lyonnais,  12  Q.  B.  D.  589. 

Brockway  vs.  Express  Company,  47  X.  E.  S7  (Mass.). 
t  Wharton,  CJonflict  of  Laws,  Sec.  471. 


Bills  of  Lading  in  Civil  Law.  825 

that  of  the  relativ^e  rights  also  of  the  transferee  or 
pledgee  of  the  bill  of  lading  and  of  the  owner  of  the 
goods.  It  is  not,  therefore,  only  the  original  contract 
contained  in  the  bill  of  lading  which  we  have  to  con- 
sider in  this  investigation,  but  also  the  subsequent 
transfer  or  pledge  of  the  bill,  and  the  consequent 
rights  of  the  transferee  or  pledgee  as  affected  by  the 
law  under  which  the  transfer  or  pledge  has  been 
made. 

The  two  questions  may  be  merged  into  one,  and 
that  is  :  under  what  law  did  the  owner  of  the  goods, 
or  the  original  holder  of  the  bill  of  lading,  and  the 
common  carrier  intend  to  contract :  under  the  lex  loci 
contractus  or  the  lex  loci  solutionis?  If  under  the 
former,  the  subsequent  contract  of  pledge  must  be 
governed  b}'  the  same  law ;  and,  vice  vei'sa^  if  the 
original  shipper  and  the  carrier  intended  to  submit  to 
the  law  of  the  place  of  performance  it  is  that  law 
which  must  govern  the  subsequent  pledge  of  the  bill 
of  lading.  It  is  evident,  for  instance,  that  if  the 
owner  of  the  goods  did  not  intend  to  accept  the  rule  of 
the  French  law,  that  possession  of  movable  property  is 
equivalent  to  title,  when  he  shipped  his  goods  and  re- 
ceived the  bill  of  lading,  the  subsequent  pledge  of  the 
bill  by  his  agent  fraudulently  or  without  authority  can 
not  afifect  him.  The  converse  of  the  rule  is  equally 
true.  If  the  original  shipper  intended  to  be  governed 
by  the  American  law,  the  subsequent  pledgee  in  good 
faith  of  the  bill  of  lading  would  have  no  valid  right 
against  the  true  owner  of  the  goods  if  they  were 
pledged  against  his  will.      The  intention  of  the  origi- 


326  The  Law  of  Pledge. 

nal  shipper  and  of  the  common  carrier  as  to  the  two 
jaws  of  the  place  of  the  contract  and  of  that  of  per- 
formance is,  therefore,  the  first  question  to  consider 
on  this  subject. 

370.  That  the  lex  loci  solutionis  must  orovern  as  to 
the  nature  of  the  contract  is  stated  by  Judge  Story  in 
these  words  :  "  The  rules  already  considered  suppose 
that  the  performance  of  the  contract  is  to  be  in  the 
place  where  it  is  made,  either  expressly  or  by  tacit 
implication.  But  where  the  contract  is  either 
expressly  or  tacitly  to  be  performed  in  any  other 
place,  there  the  general  rule  is,  in  conformity  to  the 
presumed  intention  of  the  parties,  that  the  contract  as 
to  its  validity,  nature,  obligation  and  interpretation,  is 
to  be  governed  by  the  law  of  the  place  of  perform- 
ance. This  would  seem  to  be  the  result  of  natural 
justice ;  and  the  Roman  law  has  adopted  it  as  a 
maxim  :  '  Contraxisse  nnusquisque  in  eo  loco  intelle- 
gitur^  in  quo  ut  solver et^  se  ohligavit.''  "* 

371.  The  later  writers  on  the  conflict  of  laws  concur 
with  Judge  Story  on  this  point.  Mr.  Dicey,  the  dis- 
tinguished English  lawyer,  even  quotes  in  full  the 
passage  of  Judge  Story's  book  which  we  transcribe 
here ;  and  Doctor  Wharton,  with  his  usual  learning 
and  knowledge  of  the  Roman  law,  expresses  the  same 
opinion  .f 

*  Story,  Conflict  of  Laws,  Sec.  2S0. 
t  Dicey,  Conflict  of  Laws,  p.  571. 

Wharton,  Conflict  of  Laws,  Sec.  401. 

Cox  vs.  United  States,  6  Pet.  172. 

Scudder  vs.  Union  Bank,  91  U.  S.  40G. 

rritchard  vs.  Norton,  106  U.  S.  124. 

Lamar  vs.  Micou,  114  U.  S.  218. 

Watts  vs.  Camors,  115  U.  S.  353. 


Bills  of  Lading  in  Civil  Law.  327 

Mr.  Dice}'  quotes  also  the  words  of  Lord  Esher, 
which  are  emphatic  on  this  subject :  "  The  business 
sense  of  all  business  men  has  come  to  this  conclusion, 
that,  if  a  contract  is  made  in  one  country  to  be  car- 
ried out  between  the  parties  in  another  country,  either 
in  whole  or  in  part,  unless  there  appears  something 
to  the  contrary,  it  is  to  be  concluded  that  the  parties 
must  have  intended  that  it  should  be  carried  out 
according  to  the  law  of  that  other  country.  There- 
fore the  law  has  said,  that  if  the  contract  is  to  be  car- 
ried out  in  whole  in  another  country,  it  is  to  be  carried 
out  wholly  according  to  the  law  of  that  country,  and 
that  must  have  been  the  meaning  of  the  parties.  But 
if  it  is  to  be  carried  out  partly  in  another  country 
than  that  in  which  it  is  made,  that  part  of  it  which  is 
to  be  carried  out  in  that  other  country,  unless  some- 
thing appears  to  the  contrary,  is  taken  to  have  been 
intended  to  be  carried  out  according  to  the  laws  of 
that  countr}'."* 

372.  The  Civilians  are  fully  as  positive  on  this  sub- 
ject, in  declaring  that  it  is  the  law  of  the  ])lace  of  per- 
formance which  governs  the  rights  and  obligations  of 
the  contracting  parties,  unless  something  in  the  con- 
tract shovjs  that  such  is  not  their  intention.  The  great 
Savigny,  whose  very  name  sounds  as  high  authority 
in  the  countries  of  Civil  law,  has  examined  this  ques- 
tion from  the  standpoint  both  of  the  jurisconsult  and 
the  philosopher,  and  says  that  in  order  to  determine 
the  seat  of  the  obligation  and  the  special  jurisdiction 

*  Dicey,  Conflict  of  Laws,  with  Am.  notes,  p.  571. 


328  The  Law  of  Pledge. 

under  which  it  should  fall,  we  have  to  choose  between 
the  place  where  the  contract  is  entered  into  and  the 
place  where  it  is  performed,  between  its  beginning 
and  its  end.  For  which  of  the  two  places  shall  we 
decide?  Not  for  the  first,  which  is,  in  itself,  a  mere 
accidental  fact,  of  momentary  existence,  foreign  to 
the  essence  of  the  contract,  as  well  as  to  its  develop- 
ment and  to  its  ulterior  efficacy.  But  it  is  not  so  of 
the  performance  of  the  obligation.  This  is  of  the 
essence  of  the  agreement.  As  long  as  the  obligation 
is  not  performed,  it  is  uncertanr  and  depends  upon 
the  will  of  the  debtor ;  it  is  its  performance  which 
renders  it  certain  ;  //  is  therefore  upon  its  perform- 
ance that  tJie  attefition  of  the  contracting  parties 
has  bee?i  Jixed.  It  is,  consequentl}',  the  place  where 
the  obligation  is  to  be  performed  which  will  deter- 
mine the  law  to  which  the  parties  have  intended  to 
submit  themselves.  * 

373.  Savign}'  is  also  of  opinion,  which  is  of 
great  importance  in  the  particular  question  which 
now  occupies  us,  that  in  the  contract  for  delivery  of 
goods,  the  place  of  delivery  is  the  pjace  of  perform- 
ance, as  delivery  is  performance  in  such  contracts. 

Whether  the  delivery  is  in  execution  of  the  contract 
of  sale,  or  in  execution  of  the  contract  of  carriage,  as 
evidenced  by  bills  of  lading,  there  can  be  no  possible 
distinction,  so  far  as  the  principle  is  concerned. 


Savigny,  Treatise  of  Roman  Law,  Vol.  S.  pp.  203  at  seq. 
Laurent,  Droit  Civil.  Vol.  1.  p.  165,  Sec.  104. 
Pasicrisie,  1849,  II,  107. 


Bills  of  Lading  in  Civil  Law.  329 

One  of  the  reasons  given  by  Savigny  to  support 
his  views  is  taken  from  the  Roman  law,  and  rests 
upon  the  fact  that  the  execution  of  a  contract  for  the 
delivery  of  movables  can  only  be  compelled  at  the 
place  where  the  goods  lie.* 

314.  It  results  clearly  from  those  authorities  that 
when  the  law  of  the  place  of  performance  governs 
the  rights  and  obligations  of  the  parties  to  a  contract 
it  is  simply  because  they  have  intended,  either  ex- 
pressly or  by  implication,  that  it  should  be  so.  By 
their  consent,  therefore,  the  lex  loci  solutionis  is  an 
element  of  contract  in  the  premises.  That  law  is  not 
imposed  upon  them ;  they  have  chosen  it  themselves 
as  the  arbiter  of  their  agreement.  The  Courts,  con- 
sequently, should  not  be  loath  to  apply  it,  whether 
the  Courts  are  those  of  the  country  where  the  contract 
was  entered  into  or  those  of  the  country  where  it  is  to 
be  performed  ;  whether  the  Courts  are  appl3'ing  their 
home  law  or  a  foreign  law. 

375.  It  is  clearly  under  the  principle  that  the  express 
or  tacit  agreement  of  the  contracting  parties  fixes  the 
law,  either  loci  con&actiis  or  loci  solutionis^  by  which 
they  shall  be  governed,  that  the  law  of  the  place  of 
acceptance  of  a  bill  of  exchange  regulates  the  questions 
of  demand,  days  of  grace,  protest,  etc.  The  place 
of  acceptance  and  pa}ment  is  the  place  of  perform- 
ance, as  acceptance  and  payment  are  the  performance 


Savigny,  Treatise  of  Roman  Law,  VoL  S,  Sec.  390. 
Wharton,  Contlict  of  Laws,  Sec.  416. 
Finch  vs.  Manstield,  98  Mass.  149. 
Suit  vs.  Woodhall,  113  Mass.  39L 


330  The  Law  ob'  Pledge. 

of  the  contract  of  bills  of  exchange.  It  is  for  the  same 
reason  that  the  law  of  the  place  of  payment  of  a  note 
or  bond  fixes  the  rate  of  interest,  payment  being  the 
performance  of  the  obligation  to  pay  the  note  or  bond. 
The  principle  has  become  a  rule  of  the  Common  law 
simply  because  the  understanding  and  consent  of  the 
parties  have  established  the  custom. 

The  payment  or  performance  of  the  obligation  is 
the  same  thing.  Payment,  in  its  legal  sense,  is  the 
fulfilment  of  the  promise  of  the  debtor  of  the  obliga- 
tion. In  the  contract  of  carriage,  the  carrier  is  the 
debtor  of  the  promise  to  deliver  the  goods.  Delivery 
is  the  performance  of  his  promise.  The  place  of  deliv- 
ery is  the  place  of  performance.  In  default  of  a  con- 
trary agreement,  the  law  of  that  place  should  govern 
the  rights  and  obligations  of  the  shipper  and  the  car- 
rier and  of  their  transferees  or  assignees. 

376.  In  the  case  of  contracts  by  bill  of  lading,  the 
relative  facts  of  the  shipper  and  carrier  being  or  not 
<:itizens  of  the  same  country ;  being  or  not  at  the 
place  of  their  common  domicil  in  making  the  con- 
tract, etc.,  are  only  circumstances  to  be  consulted  in 
-considering  the  question  of  the  intention  of  the  par- 
ties to  submit  their  rights  and  obligations  to  the  law 
of  one  country  or  the  other.  Such  circumstances  are 
of  no  importance  except  so  far  as  they  may  help  in 
discovering  the  intention  of  the  parties,  * 

Is  there  in  the  mere  fact  of  goods  being  shipped  to 

*  Story,  Conflict  of  Laws,  Sec.  279. 


Bills  of  Lading  in  Civil  Law.  331 

a  foreign  port  an  indication  that  the  shipper  and  the 
carrier  intend  to  choose  the  law  of  the  foreign 
port  as  the  law  of  performance  of  their  contract, 
and  to  be  bound  by  it,  when  the  bills  of  lading  con- 
tain nothintjf  indicative  of  such  an  intention?  This 
question  was  presented  for  the  first  time  to  the  Su- 
preme Court  of  the  United  States  in  the  important 
case  of  Liverpool  Steam  Company  vs.  Phcenix  In- 
surance Company,  129  U.  S.  397.  Goods  in  that 
case  were  shipped  in  New  York  to  Liverpool  on  an 
English  vessel,  with  bills  of  lading  which  exempted 
the  carrier  from  liability  for  the  loss  caused  by  strand- 
ing, and  exempted  also  his  responsibility  for  the  loss 
caused  by  the  negligence  of  his  servants.  By  the  law 
of  England  the  clause  in  the  bills  of  lading  was  legal 
and  valid.  By  the  American  law  and  jurisprudence 
such  exceptive  clause  and  restriction  of  responsibility 
are  not  legal  and  valid.  The  goods  were  lost  or  dam- 
aged by  stranding  of  the  vessel,  proved  to  have 
been  caused  by  the  negligence  of  the  master  and  offi- 
cers. If  the  case  was  to  be  decided  under  the  law  of 
England  the  shipper  could  not  recover  from  the  com- 
mon carrier.  Otherwise,  if  the  law  of  the  United 
States  was  to  apply. 

After  a  full  review  and  recognition  of  the  law  loci 
solutionis  and  of  the  principle  that  it  should  govern 
the  case  if  it  were  shown  that  it  had  been  the  inten- 
tion of  the  contracting  parties  to  submit  to  it,  the 
Supreme  Court  said:  ''There  does  not  appear  to  us 
to  be  anything  in  either  of  the  bills  of  lading   in  the 


332  The  Law  of  Tledge. 

present  case  tending  to  show  that  the  contracting 
parties  looked  to  the  law  of  England,  or  to  any  other 
law  than  that  of  the  place  where  the  contract  was 
made." 

It  seems  difficult  to  understand  how  an  English 
common  carrier,  issuing  English  bills  of  lading  and 
undertakmg  to  carry  the  goods  on  an  English  vessel  and 
deliver  them  to  an  English  port  under  the  terms  and 
conditions  of  the  said  English  documents,  did  not  look 
to  the  law  of  England  in  the  matter  and  did  not  think 
that  he  was  contracting  under  it.  The  remark  of  the 
Court  might  properly  apply  to  the  American  shipper, 
but  hardly  to  the  English  carrier. 

377.  Further  on  the  Court  said:  ''The  contract 
being  made  at  New  York,  the  ship  owner  having  a 
place  of  business  there,  and  the  shipper  being  an 
American,  both  parties  must  be  presumed  to  have 
submitted  themselves  to  the  law  there  prevailing,  and 
to  have  agreed  to  its  action  upon  their  contract.  The 
contract  is  a  single  one,  and  its  principal  object,  the 
transportation  of  the  goods,  is  one  continuous  act,  to 
begin  in  the  port  of  New  York,  to  be  chiefly  per- 
formed on  the  high  seas,  and  to  end  at  the  port  of 
Liverpool.  The  facts  that  the  goods  are  to  be  deliv- 
ered at  Liverpool,  and  the  freight  and  primage,  there- 
fore, payable  there  in  sterling  currency,  do  not  make 
the  contract  an  English  contract,  or  refer  to  the  Eng- 
lish law  the  question  of  the  liability  of  the  carrier  for 
the  negligence  of  the  master  and  crew  in  the  course 
of  the  voyage.     Peninsular  and  Oriental  Company  vs. 


Bills  of  Lading  in  Civil  Law.  333 

Shand;  Lloyd  vs.  Guibert,  and  Chartered  Bank  of 
India  vs.  Netherlands  Steam  Navigation  Company, 
before  cited."  * 

378.  What  might  have  been  the  judgment  of  the 
Court  if  the  shipment  had  taken  place  in  England, 
under  the  same  bill  of  lading,  and  the  goods  destined 
for,  and  on  their  way  to  the  port  of  New  York,  had 
been  lost  b}-  stranding  caused  by  the  negligence  of 
the  officers  of  the  vessel?  Would  the  Court  have 
applied  the  lex  loci  contractus  and  given  effect  to  the 
exceptive  clauses  of  the  bills  of  lading?  Bv  a  parity 
of  reasoning  and  under  the  same  principles  by  which 
it  applied  the  American  law  to  what  it  called  an 
American  contract,  it  should  clearly  have  applied  the 
English  law  to  what  it  would  then  have  been  com- 
pelled to  call  an  English  contract. 

379.  When  the  Supreme  Court,  in  that  case,  saj^s 
that  the  facts  that  the  goods  are  to  be  delivered  at  Liver- 
pool, and  the  freight  and  primage,  therefore,  payable 
there  in  sterling  currency,  do  not  make  the  contract  an 
English  contract — how  far  we  are  from  the  rule  stated 
by  Savigny,  that  the  place  where  the  contract  is 
entered  into  is  a  mere  accident,  foreign  to  the  essence 
of  the  contract  as  well  as  to  its  ulterior  efficac}' ;  and 
that  it  is  the  place  of  performance  which  is  of  the 
essence  of  the  contract,  and  upon  which  the  attention 
of  the  contracting  -parties  has  been  fixed.  Upon 
what    place    and   upon   what  law,   therefore,   has  the 


Liverpool    Steam   Company    vs.    Phcenix   Insurance   Company, 
129  U.  S.  458,  450. 


334  The  Law  of  Pledge. 

attention  of  the  shipper  been  fixed,  when  he  sent  his 
goods  to  a  foreign  port,  on  a  foreign  vessel  and  with 
foreign  bills  of  lading?  Can  it  be  upon  any  other 
place  than  that  where  he,  or  his  agent  or  consignee, 
is  to  receive  the  goods?  Where  he  is  to  demand 
delivery  and  possession  of  them,  by  legal  proceedings, 
if  necessary? 

380.  But  it  is  evident  that,  in  such  cases,  the  Courts 
prefer  their  home  laws.  In  the  words  of  Mr.  Dicey: 
"  The  distinct  and  still  strong  preference,  however,  of 
Enoflish  courts  for  the  lex  loci  contractus  must  never 
be  forgotten.  This  preference  leads  to  the  result  that, 
in  all  cases  of  doubt,  and  especially  where  a  contract 
is  made  in  England,  our  courts  hold  that  the  proper 
law  of  the  contract  is  the  law  of  the  country  where  the 
contract  is  made."  * 

The  same  thing  may  be  said  of  the  American  courts, 
of  the  French  courts  and  probably  of  the  courts  of  all 
countries. f 

381.  The  case  of  the  Liverpool  Steam  Company 
against  the  Phcenix  Insurance  Company  only  decides 
one  phase  of  the  question  which  we  are  investigating, 
to-wit :  that  the  lex  loci  contractus^  and  not  the  lex 
loci  solutionis  should  govern  the  contract  of  carriage 
when  the  bills  of  lading  do  not  expressly  show  that  the 
contracting  parties  intended  that  the  place  of  delivery 
of  the  goods  should  be    held  to  be   the  place  of  per- 


*  Dicey,  Conflict  of  Laws,  p.  571. 
t  Merlin,  Repertoire,  verho  Lol.  Sec.  G,  No.  2. 
Laurent,  Droit  Civil,  Vol.  1,  Sec.  104. 


Bills  of  Lading  in  Civil  Law.  335 

formance,  and  that  its  law  should  be  the  law  of  the 
contract.  The  other  phase  of  the  question,  more 
directly  connected  with  our  subject,  is  whether  the 
pledge  of  bills  of  lading  should  be  governed  by  the 
law  of  the  place  where  the  contract  of  carriage  is. 
entered  into,  or  by  the  law  of  the  place  of  delivery 
of  the  goods,  or  by  the  law  of  the  place  where  the 
contract  of  pledge  is  entered  into. 

382.  We  may  premise  the  investigation  with  the 
reflection  that  the  pledgeor  of  the  bills  of  lading  can 
only  transfer  to  the  pledgee  such  rights  in  the  bills, 
and,  therefore,  to  the  goods  they  cover,  which  he 
himself  has,  under  the  rule  of  the  Common  law  and  of 
the  statutory  law  of  England  and  of  the  States  of  the 
Union,  except  Maryland;  and  that,  on  the  contrarj^, 
in  the  latter  State,  under  the  law  which  makes  bills 
of  lading  negotiable  to  the  same  extent  as  bills  of 
exchange,  and  promissory  notes  ;  and  in  France  and 
other  European  States,  under  the  principles  of  the 
Commercial  law  which  protect  the  honest  vendee  or 
pledgee  against  all  claims  ;  a  dishonest  agent,  or  factor, 
or  possessor  of  personal  or  movable  property  covered 
by  bills  of  lading  made  to  his  order,  can  actually 
transfer  to  a  bona  Jide  pledgee  rights  which  he  him- 
self has  not  to  the  bills  and,  consequently,  to  the  goods 
which  they  cover ;  and  that  the  rights  thus  acquired 
by  the  pledgee  are  paramount  to  those  of  the  true 
owner  of  the  goods,  even  when  these  were  disposed 
of  without  his  consent. 

382.   The  contract  of  pledge  being  an  accessory  one, 


336  The  Law  of  Pledge. 

should  be  governed  by  the  same  law  which  governs 
the  principal  obligation,  as  the  existence  of  the  former 
depends  upon  that  of  the  latter.  It  must  be  pre- 
sumed that,  in  that  respect,  the  pledgeor  and 
the  pledgee  intended,  in  entering  into  the  contract  of 
pledge,  that  it  should  thus  be  governed  by  the  law  by 
which  their  principal  obligation  was  to  be  governed. 
But  this  reflection  will  hardly  afford  us  any  assist- 
ance in  the  solution  of  our  question,  for  the  same  dif- 
ficulty remains  :  What  law  is  to  govern  the  principal 
obligation,  that  of  the  place  of  the  contract  or  that  of  the 
place  of  performance,  when  the  principal  obligation  is 
the  contract  of  carriage  evidenced  by  bills  of   lading? 

383,  If  the  case  of  the  Liverpool  Steam  Compan}' 
vs.  the  Phoenix  Insurance  Company  has  fixed  the  law 
and  established  the  principle  that,  in  bills  of  lading, 
the  lex  loci  contractus  ^ov\di  govern  the  contract,  and 
not  the  lex  loci  solutionis^  then  the  pledge  of  bills  of 
lading  should  be  recognized  and  governed  according 
to  the  law  of  the  country  where  they  were  issued.  In 
such  a  case  the  courts  of  America  should  apply  the 
law  of  France  to  the  pledge  of  bills  issued  in  France 
on  goods  delivered  in  America,  and  uphold  the  honest 
pledgee  against  the  true  owner  of  the  goods.  And 
for  the  same  reason  the  courts  of  France  should  apply 
the  law  of  America  to  the  pledge  of  bills  of  lading 
issued  in  America  on  goods  delivered  in  France  and 
uphold  the  true  owner  against  the  honest  pledgee. 

384.  In  either  case  we  think  that  the  courts  would 
be  but  little  inclined  to  apply  laws  so  entirely  foreign 


Bills  of  Lading  in  Civil  Law.  337 

to  their  own  and  opposed  to  its  spirit.  We  can  hardly 
conceive  of  the  American  courts  applying  the  rule 
that  the  possession  of  movable  property  is  equivalent 
to  title,  or  of  the  French  courts  applying  the  principle 
that  the  ovv^ner  of  goods  has  a  better  right  than  the 
honest  pledgee  in  a  commercial  transaction.  The 
discussing  of  theoretical  questions  of  law  and  of  ab- 
stract principles  by  law  writers  is  one  thing,  and  the 
deciding  of  the  actual  rights  of  litigants  by  the  courts 
is  another  thing.  The  great  Savigny  may  say  that 
the  place  where  parties  enter  mto  the  contract  is 
but  an  accident,  and  that  it  is  the  place  where  the 
contract  is  to  be  performed  which  occupies  their 
minds  ;  but  a  great  Court  will  decide  in  the  case  of 
bills  of  lading  that  the  contracting  parties  in  entering 
into  the  contract  of  carriage  had  in  view  the  law  of 
the  place  where  they  were  at  the  time,  and  not  that 
of  the  place  where  the  goods  were  to  be  delivered. 

385.  The  question  whether  a  bill  of  lading  as  a 
contract  should  be  governed  by  the  lex  loci  contractus 
or  b}^  the  lex  loci  solutionis^  in  its  construction,  valid- 
ity and  effects,  has  been  well  examined  and  discussed, 
and  the  Common  law  authorities  bearing  upon  the 
doctrine  have  been  fully  reviewed  by  Mr.  Porter  in 
his  recent  work  on  the  Law  of  Bills  of  Ladins-* 


Porter,  on  Bills  of  Lading,  Sees,  89  et  seq. 


CHAPTER  XXXII. 
Pledge  of  Warehouse  Receipts. 

386.  When  merchandise  is  traveling,  the  pledge  ot 
it  is  effected  by  endorsement  and  delivery  of  the  bill 
of  lading  to  the  pledgee,  not  because  the  bill  of  lading 
is  the  symbol  of  merchandise,  as  we  have  seen,  but 
because  by  the  transfer  of  it  to  the  pledgee,  possession 
is  constructively  given  to  him,  and  he  is  entitled  to 
delivery  of  the  goods 

When  the  merchandise  is  not  traveling  but  is  de- 
posited and  lying  in  a  warehouse,  the  pledge  of  it  is 
effected  by  transfer  of  the  warehouse  receipt  to  the 
pledgee,  for  the  same  reason  and  with  the  same  effect. 
The  warehouse  receipt  is  like  the  bill  of  lading,  the 
title  or  muniment  of  title  to  the  goods  it  covers,  and 
the  transfer  of  it,  transfers  also  the  possession  of  them 
to  the  pledgee.  It  transfers  the  possession  of  the 
goods  because  the  warehouse  receipt,  like  the  bill  of 
lading,  entitles  the  holder,  and  him  alone,  to  the 
delivery  of  the  goods.  The  warehouse  man  has  pos  • 
session  vicariously  for  account  of  whomsoever  is  the 
holder  of  the  receipt,  and,  therefore,  the  pledgee  of 
the  goods  gets  the  constructive  possession  of  them  by 
the  transfer  of  the  warehouse,  which  is  sufficient  for 
the  validity  of  the  pledge. 

Merchandise  forms  the  whole  subject  and  object  of 
commerce.     Whether  traveling  or  lying  at  home,   its 

339 


340  The  Law  op  Pledge. 

transfer  and  delivery  are  constantly  a  matter  of  very 
great  importance.  When  lying  at  home  it  is  necessa- 
rily placed  in  warehouses,  and  the  transfer  of  it  for 
purposes  either  of  sale  or  pledge,  taking  place  a  num- 
ber of  times  possibly  in  a  single  day,  can  not  practi- 
cally be  made,  when  on  a  large  scale,  by  actual  and 
corporeal  delivery.  Necessity,  the  foundation  of  com- 
mercial law,  has,  therefore,  established  the  rule  that 
the  transfer  of  merchandise  in  warehouses  is  made  by 
transfer  and  deliver}-  of  the  warehouse  receipt,  and 
that  such  transfer  and  delivery  constitute  the  transfer 
and  delivery  of   the  merchandise  itself. 

387 .  The  warehouse  receipt  has  been  for  that  reason 
made  ^^/(^^^/-negotiable  and  transferable  by  endorse- 
ment and  delivery  at  Common  law  in  the  same  man- 
ner as  bills  of  lading,  but  subject  like  bills  of  lading 
to  the  claims  or  equities  of  the  true  owner  of  the 
goods.  The  same  rules  govern  to  a  certain  extent 
both  subjects,  and  in  several  States  the  same  statutes 
control  both.  The  Court  of  Wisconsin  has  stated  the 
principle  in  the  following  words  : 

''  The  receipt  of  a  warehouseman  or  wharfinger,  and 
the  receipt  or  bill  of  lading  of  a  common  carrier,  are 
contracts  of  precisely  the  same  general  nature  and 
effect,  and  should  obviously  be  governed  by  the  same 
rules  and  principles  as  to  the  application  of  the  doc- 
trine of  estoppel  or  negotiability,  which  with  respect 
to  such  contracts  mean  one  and  the  same  thing.  They 
are,  or  may  be  said  to  be^  negotiable  or  conclusive  in 
the  hands  of  a  bo7ia  fide  assignee  or  holder   for  value, 


Pledge  of  Warehouse  Receiits.  341 

so  far  as  the  party  executing  them,  warehouseman  or 
carrier,  has  made  or  is  bound  by  the  representations 
contained  in  them.  They  are  negotiable,  or  conclu- 
sive and  valid  in  the  hands  of  such  a  holder  because 
the  signer,  or  party  by  whom  they  are  executed,  is 
estopped,  or  not  permitted  to  deny  the  existence  of 
the  facts  represented  in  or  by  them,  and  which  are 
presumed  to  have  been  within  his  knowledge  at  the 
time  of  their  execution."  * 

388.  The  pledgee  of  a  warehouse  receipt  is  the 
apparent  owner  of  the  goods  it  covers,  as  the  pledgee 
of  a  bill  of  lading  is  the  apparent  owner  of  the  goods 
which  it  covers.  But  such  pledgee  has,  in  the  one 
case  as  in  the  other,  only  the  rights  to  the  goods 
which  the  transferror  himself  had.  If  the  transferror 
of  the  warehouse  receipt  was  not  the  owner  of  the 
goods,  or  had  no  power  or  right  to  make  the  transfer, 
the  true  owner  can  recover  them  from  the  pledgee. f 


*  Hale  vs.  Milwaukee  Dock  Company,  29  Wis.  486. 

t  Commercial  Bank  vs.  Hurt  (Ala.),  12  Southern  Rep.  56S. 

Farmers'  Bank  vs.  Blevins,  46  Kansas,  536. 

Greenbaum  vs.  Burnes,  13  Ky.  LawR.  267. 

Conrad  vs.  Fisher,  37  Mo.  App.  352. 

Hanchett  vs.  Buckley,  27  111.  App.  159. 

Hazard  vs.  Fiske,  S3  N.  Y.  287. 

Bank  vs.    Galley,  92  Penn.  St.  518. 

First  National  Bank  vs.  Boyce.  78  Ky.  42. 

Gibson  vs.  Stevens,  8  How.  384. 

McCullough  vs.  Roots,  19  How.  349. 

Insurance  Company  vs.  Kiger,  103  U.  S.  352. 

Martin  vs.  His  Creditors,  14  La.  An.  392. 

Same  vs.  Same,  15  La.  An.  165. 

Carter  vs  Merrill  &  Co.,  14  La.  An.,  375. 

Burham  vs.  C.  V.  S.  Co.,  142  X.  Y.  169. 

Bank  vs.  Dean  et  ah,  137  N.  Y.  110. 

Hanover  National  Bank  vs.  Am.  D.  and  T.  Co..  148  N.  Y.  612. 

Corn  Ex.  Bank  vs.  Am.  I),  and  T.  Co.,  149  N.  Y.  174. 

State  Nat.  Bank  vs.  Bryant,  49  La.  An.  467. 

Young  vs.  Lambert,  3  Privy  Council  Report,  p.  142. 


342  The  Law  of  Pledge. 

389.  The  law  of  almost  all  the  States  of  this  Union 
as  well  as  of  England^  and  differently  from  that  of 
France  and  other  countries  of  Europe,  to-wit:  that 
the  possession  of  personal  property  is  presumptive  of 
but  not  equivalent  to  title,  applies  therefore  to  ware- 
house receipts  and  to  the  goods  they  cover.  But  this 
must  be  understood  with  the  qualification  that  when 
or  where  the  warehouse  receipts  are  made  bv  statute, 
as  in  the  State  of  Mar3-land,  and  possibly  in  Louisi- 
ana, absolutely  negotiable,  or  negotiable  in  the  same 
manner  and  to  the  same  extent  as  bills  of  exchange  and 
promissory  notes,  they  are  then  transformed  into  nego- 
tiable paper  and  are  governed  by  the  principles  of 
the  law  merchant.  In  that  case  the  goods  the}^  cover 
pass  to  the  transferee  or  pledgee  of  the  warehouse 
receipt,  even  against  the  true  owner.  * 

390.  We  have  just  said  that  possibly  in  Louisiana, 
as  in  Maryland,  the  warehouse  receipts  were  identi- 
fied by  statute  with  negotiable  paper.  We  used  the 
dubitative  form  of  expression  because  the  Court  of 
Louisiana  has  not  construed  the  statute  in  that  sense, 
but  the  words  of  the  law  do  not  seem  to  admit  of  any 
doubt  as  to  its  object  on  the  question  of  negotiability. 
The  statute  of  Louisiana  provides  that :  "  The  receipt 
issued  against  propert}-  stored  in  public  warehouses, 
as  herein  provided  for,  shall  be  negotiable  and  trans- 
ferable by  endorsement  in  blank  or  by  special 
endorsement  and  deliver)-,  {71  tJie  same  maimer  and  to 
the  same  extent  as  bills  of  exchange  and  promissory 

*  Tiednian  vs.  Knox,  53  Maryland,  612. 


Pledge  op  Warehouse  Receipts.  343 

notes  noiv  are^  without  other  formahty,  and  the  trans- 
feree or  holder  of  such  pubUc  warehouse  receipt 
shall  be  considered  and  held  as  the  actual  and  exclu- 
sive owner,  to  all  intents  and  pu-rposes,  of  the  prop- 
ert}-  therein  described,  subject  ©nl}^  to  the  lien  and 
privilege  of  the  public  warehouseman  for  storage  or 
other  warehouse  charges."* 

This  law  makes  a  distinction  between  public  and 
private  warehouses,  a  distinction  which  did  not  exist 
under  the  previous  law  of  Louisiana. 

But,  even  under  the  previous  law  the  rights  of  the 
holder  of  warehouse  receipts  had  been  recognized  by 
the  Court  of  Louisiana  as  paramount  to  those  of  the 
vendor  of  the  goods  in  the  warehouse.*!* 

We  should  be  disposed,  therefore,  to  consider  that, 
under  the  statute  of  1888,  the  law  in  Louisiana  makes 
the  pledgee  in  good  faith  of  a  public  warehouse  receipt 
a  holder  for  value,  and^  consequently,  entitled  to  the 
goods  even  as^ainst  the  true  owner,  if  that  statute  had 
not  been  modified  by  one  of  1890,  which  puts  the 
transferee  of  the  warehouse  receipt  behind  the  seller 
of  agricultural  products  in  certain  cases.  In  every 
agricultural  State  the  interest  of  the  farmer  or  planter 
is  evidently  one  of  the  principal  objects  of  the  law. 
The  statute  of  Louisiana  of  1890,  therefore,  provides 
that  the  vendor  of  agricultural  products  of  the  United 
States  in  any  town  in  Louisiana  shall  have  a  lien 
upon  them  for  the  price  during  five  days  after  delivery, 
and  that  such   lien   and   preference  shall  outrank  all 


*  Acts  of  Louisiana,  of  1868,  p.  218, 'Sec.  7. 

t  Harris,  Pairker  &  Co.  vs.  Nicolopoulo,  38  La.  An.  12. 


344  The  Law  of  Pledge. 

other  claims,  and  especially  the  rights  of  the  holders 
of  warehouse  receipts.* 

391.  The  intention  of  the  lawgiver  in  Louisiana 
seems  clearl)-  to  have  been,  ever  since  the  year  1876, 
to  render  warehouse  receipts  fully  negotiable.  It  is 
only  in  1890,  by  the  law  enacted  in  that  year,  that 
such  negotiability  has  been  restricted  by  rendering 
the  lien  of  the  vendor  of  agricultural  products,  during 
five  days,  paramount  to  the  rights  of  a  bona  fide 
holder  of  the  warehouse  receipts. 

The  law  of  1876  provides  in  its  fourth  section: 
"That  parties  who  may  borrow  mone}''  on  the  faith 
of  warehouse  receipts  representing  property-  in  store 
shall  file  their  affidavit  with  the  pledgees  that  such 
property  is  theirs,  the  pledger's  personal  property,  or 
that  it  is  the  propert}^  of  some  party  for  whom  the 
pledger  is  acting  as  agent,  factor,  commission  mer- 
chant, or  in  any  other  tiduciar}-  capacity,  and  that  said 
party  is  justly  and  truly  indebted  to  the  pledger  in  an 
amount  equal  in  value  to  the  value  of  the  property 
pledged,  as  specified  in  the  warehouse  receipt  for 
moneys  paid  to  him,  or  paid  by  his  order  and  for  his 
account  by  the  party  or  consignee  making  the  pledge. 
The  cashier  of  a  bank  or  the  secretary  of  any  insur- 
ance company  incorporated  or  working  under  any  law 
in  the  United  States,  or  of  this  State,  is  hereby 
authorized  to  administer  the  oath  contemplated  under 
the  provisions  of  this  act.  Any  deviation  therefrom 
shall    render    the    party  or  parties  so   deviating  liable 

*  statute  of  Louisiana.  1890.  p.  51. 


Pledge  of  Warehouse  Receipts.  345 

for  the  value  of  the  property,  or  any  excess  in  value 
over  and  above  the  amount  for  which  it  may  have 
been  pledged  in  any  manner  specified  in  Sec.  i  of 
this  act,  and  to  the  prosecution  for  perjury  and  also 
for  obtaining  money  under  false  pretenses." 

Section  5  of  the  same  law  provides :  "  That  the 
vendor's  lien  of  five  days'  privilege,  now  allowed  in 
commercial  transactions  for  the  payment  of  the  pur- 
chase price,  shall  not  be  affected  by  the  provisions  of 
this  act,  except  in  case  in  which  a  warehouse  receipt 
has  been  pledged  as  collateral  for  money  borrowed. 
The  holder  of  the  warehouse  receipt  shall  be  consid- 
ered and  held  as  the  actual  owner  of  the  property 
described  in  the  receipt,  and  no  clause  of  this  act  shall 
operate  to  the  detriment  or  injury  of  the  holder  of  a 
warehouse  receipt,  to  the  extent  of  the  value  of  the 
property  specified,  made  and  issued  in  accordance 
with  and  under  the  provisions  of  this  act ;  provided^ 
that  where  the  factor,  agent  or  pledger  may  have 
wrongfull}'-  pledged,  in  violation  of  this  act,  any  prop- 
perty,  the  lien  of  the  owner  shall  be  valid  even  against 
the  third  owner  of  the  warehouse  receipt." 

And  Sec.  8  provides  :  "  That  all  warehouse  receipts, 
as  by  this  act  provided,  shall  be  negotiable  by  en- 
dorsement in  blank,  or  by  special  endorsement,  in  the 
same  manner  and  to  tlie  same  exte?it  as  bills  of  ex- 
change and  promissory  notes  now  are."  * 

392.    This    renewed   attempt  of  the  Legislature  of 

*  Laws  of  187(3,  p.  113. 


346  The  Law  of  Pledge. 

Louisiana  to  render  warehouse  receipts  as  fully  nego- 
tiable as  bills  and  notes  was  also  checked  by  the 
courts.  The  Supreme  Court  of  the  United  States  in 
construing  this  statute  ignored  the  question  of  nego- 
1  lability,  and  considering  only  the  power  of  the  factor 
to  pledge  the  property  of  the  principal,  said :  "  Before 
the  act  of  i8y6  it  was  settled  by  unanimous  decisions 
in  Louisiana  that  a  factor  could  not  pledge  for  his 
own  debts  the  property  of  his  principal.  (Authorities.) 
The  act  of  1876  does  not,  as  it  seems  to  us,  materially 
enlarge  this  power  so  far  as  the  facts  of  this  case  are 
concerned.  It  makes  warehouse  receipts  the  repre- 
sentatives of  property  in  store,  and  provides  for  their 
use  to  borrow  money  on  ;  but  the  implication  is  clear 
that  their  use  in  that  way  by  a  factor  for  more  than 
the  value  of  his  interest  in  the  property  would  be 
wronsfful  and  invalid  ao^ainst  the  owner."  "^ 

And  the  Court  decided  that  the  pledgee  had  no 
right  ao;ainst  the  owner  because  the  latter  was  not  in- 
debted  to  the  pledgeor,  who  was  his  factor 

393.  But  the  Court  of  Louisiana  took  once  a  dif- 
ferent view  of  this  law  of  1876  and  remarked,  in  an 
obiter  dictum^  it  is  true,  that:  "The  act  of  1S76 
has  impressed  upon  it  throughout  the  intention  to 
give  this  priority  to  a  paraphed  warehouse  receipt  and 
nothing  else,  and  instead  of  the  halting  language  of 
the  act  of  1868,  when  it  says  the  transferee  of  a  bill 
of  lading  shall  be  deemed  to  be  the  owner  of  the 
goods  so  far  as  to  give  validity  to  liis  pledge,  etc.,  the 

*  Insurance  Co.  vs.  Kiger,  103  U.  S.  355. 


Pledge  of  Warehouse  Receipts.  347 

act  of  1876  says  outright,  the  holder  of  the  warehouse 
receipt  shall  be  considered  and  held  as  the  actual 
owner  of  the  property  described  in   the  receipt.      Sec. 

394.  In  1888  a  law  was  passed  under  which  public 

warehouses  are  to  be  established,  with  a  kind  of  quasi- 
official    character,    and    the  Legislature  of  Louisiana 

again  enacted  in  emphatic  language  that  the  ware- 
house receipts  are  negotiable  instruments  as  fully  as 
bills  and  notes ;  and  the  Court  of  Louisiana  again 
decided  that  they  are  not. 

The  statute  reads.  Sec.  7  :  "  That  the  receipts 
issued  against  property  stored  in  public  warehouses,  as 
herein  provided  for,  shall  be  negotiable  and  transfera- 
ble byendorsement  in  blankor  by  special  endorsement 
and  delivery  in  thesameinanner  and  io  the  same  extent 
as  bills  of  exchange  and  protnissory  notesnow  are^iJjith- 
out  other  formality^  and  the  transferee  or  holder  of 
such  public  warehouse  receipt  shall  be  considered  and 
held  as  the  actual  and  exclusive  owner,  to  all  intents 
and  purposes,  of  the  propert}'  therein  described,  sub- 
ject onlv  to  the  lien  and  privilege  of  the  public  ware- 
houseman for  storage  or  other  warehouse  charges ; 
provided,  however,  all  such  public  warehouse  receipts 
as  shall  have  the  words  "not  negotiable"  plainly 
written  or  stamped  on  the  face  thereof  shall  be  exempt 
from  the  provisions  of  this  section."  f 

395.  Commenting  and  adjudicating  upon  that  law, 


*  Harris,  Parker  &  Co.,  vs.  Xicolopoulo.  38  La.  An.  14. 

t  Acts  of  1888,  p.  218. 


348  The  Law  op  Pledge. 

in  a  recent  case  in  which  warehouse  receipts,  issued 
in  compUance  with  its  provisions,  had  been  given  in 
pledge  by  a  factor  to  a  tliird  holder  in  good  faith,  the 
Court  of  Louisiana  held  once  more  that  a  factor  could 
not  validly  pledge  the  goods  of  his  principal,  even 
under  the  statute  in  question,  and  through  such  ware- 
house receipts ;  and  the  court  again  construed  ad- 
versely to  the  principle  of  negotiability  the  provision 
of  the  law  so  emphatically  expressed  and  so  often 
repeated,  that  the  warehouse  receipts  were  nego- 
tiable and  transferable  by  efidorsenient  and  deliv- 
ery^ in  the  same  maimer  and  to  the  same  exteiit 
that  hills  of  exchange  and  promissory  notes  ivere.^ 

In  that  case  the  Court  reviewed  the  whole  legislation 
of  Louisiana  on  the  subject,  from  its  incipiency,  quot- 
ing the  terms  used  by  each  successive  statute  as  to  the 
negotiability  of  warehouse  receipts  in  the  saine  ma?iner 
and  to  the  same  extent  as  bills  of  excha?ige  and  promis- 
sory notes,  and  quoting  also  the  words  of  the  law^  that 
the  transferee  or  holder  of  such  ivarehouse  receipt  shall 
be  considered  a7id  held  as  the  actual  and  exclusive 
otvner  to  all  intents  and  purposes  of  the  property 
therein  described.  And  from  these  clear  and  emphatic 
terms  of  the  statute,  the  Court  drew  the  conclusion 
that  the  warehouse  receipt  pledged  by  the  factor  is  not 
valid  in  the  hands  of  the  innocent  pledgee  against  the 
true  owner  of  the  goods,  because  a  factor  has  no  righ^ 
to  pledge  the  property  of  his  principal.  It  is  proper  to 
observe  that  in  that  case  there  was  no  question  of  the 


*  Holton  &  Winn  vs.  Hubbard  &  Co.,  40  La.  An.  71;1. 


Pledge  op  Warehouse  Receipts.  349 

superior  lien  of  the  vendor  of  agricultural  products, 
under  the  law  of  1890,  the  sole  exception  made  by 
that  statute  to  the  complete  negotiability  of  warehouse 
receipts.  The  case  in  question  arose  under  the  previ- 
ous statute  of  1888,  which  made  no  exception  what- 
ever to  the  rule  of  negotiability  of  warehouse 
receipts.  Where,  therefore,  the  law  made  no  distinc- 
tion the  Court  has  made  one,  contrary  to  the  estab- 
lished rule  of  jurisprudence. 

396.  And,  where  the  statute  constitutes  the  trans- 
feree of  such  receipt  "  the  actual  and  exclusive 
owner  to  all  intents  and  purposes  of  the  property 
therein  described,"  the  Court  modifies  this  provision 
and  reduces  the  rig^ht  of  the  transferee  to  that  of  a 
relative  and  eventual  owner;  and  that,  again,  because 
the  Common  law  principle  is  opposed  to  the  pledge 
by  the  factor.  But  is  not  the  object  of  the  statute 
clearly  to  change  in  that  respect  the  Common  law.'' 
If  the  Common  law  clashes  with  a  subsequent  statute 
the  latter  should  prevail.  Evidence  of  the  custom, 
or  Common  law,  is  not  even  admissible  against  the 
written  law. 

397.  If  the  warehouse  receipt  is  rendered  nego- 
tiable by  the  statute,  a  factor's  pledge  of  it  should  be 
valid  against  his  principal,  just  as  the  pledge  of  any 
negotiable  effects  of  the  principal  by  the  unauthorized 
factor  or  agent  is  valid  in  the  hands  of  an  innocent 
pledgee.  Upon  this  last  point,  there  can  be  no  differ- 
ence of   opinion.* 

*  Kent,  Comm.,  Vol.  2,  p.  627. 
Saloy  vs.  Bank,  39  La.  An.  90. 
Givanovich  vs.  Bank,  26  La.  An.  15. 


350  The  Law  op  Pledge. 

398.  The  Court  concludes  in  its  reasoning  of  the 
case  that  it  can  not  for  an  instant  beHeve  that  the 
Legislature  would  enact  a  law  which  would  enable 
parties  to  perpetrate  fraud.  But  by  the  laws  of  the 
largest  part  of  the  civilized  world,  at  this  moment,  if 
bills  of  lading,  warehouse  receipts,  and  commercial 
property  generally,  are  pledged  by  a  factor  without 
the  consent  of  the  true  owner,  and,  therefore,  illegally, 
the  innocent  pledgee  is  protected,  not  that  the  laws 
of  those  countries  are  intended  to  enable  parties  to 
perpetrate  fraud,  but  because  they  can  not  prevent 
the  fraud.  The  law  is  simply  impotent  in  that  respect. 
Fraud  may  be  committed  in  almost  every  contract, 
and  yet  such  contracts,  but  not  the  fraud,  are  formed 
under  the  sanction  of  the  law.  The  commercial  in- 
terest, which  is  the  public  interest,  is  what  the  law 
considers,  and  not  the  cases  of  fraud,  which  are  excep- 
tional cases. 

It  might  be  said  with  equal  reason  that  the  laws 
which  create  the  full  negotiability  of  bills  of  exchange 
and  promissory  notes  should  not  have  been  estab- 
lished, because  they  enable  parties  to  commit  fraud. 
And,  indeed,  what  laws  could  enable  factors  and  other 
agents  more  easily  to  defraud  their  principals  than 
those  which  protect  the  holder  for  value  of  nego- 
tiable paper  feloniously  transferred  by  such  dishonest 
agents? 

399.  Not  by  virtue  of  the  principle  that  the  posses- 
sion of  inovables  is  equivalent  to  title,  but  under  the 
provisions  of  their  Commercial  Codes,   which   prevail 


Pledge  op  Warehouse  Receipts.  -j^I 

in  that  respect  over  their  Civil  Codes,  in  France,  in 
Holland,  in  Belgium,  in  Italy,  in  the  German 
Empire,  as  well  as  by  statutes  in  Maryland,  in  Mas- 
sachusetts, and  in  England,  the  honest  pledgee  in 
commercial  transactions  is  protected  against  even  the 
true  owner  of  the  property  fraudulently  pledged  by  a 
dishonest  factor  or  agent. "^ 

The  rule  is  clearly  in  line  with  the  advance  of  mod- 
ern civilization,  and  it  should  not  be  impeded  by  legis- 
lating judiciaries.  The  interference  of  the  latter  has 
been  condemned  by  Judge  Story  and  by  English 
judges,  such  as   Lords  Elden  and  Ellenborough.f 

400.  The  repeated  checks  of  the  courts  on  the 
attempts  of  the  legislative  power  to  legalize  the  pledges 
of  factors  by  rendering  bills  of  lading  and  warehouse 
receipts  negotiable  instruments  has  been  the  subject 
of  remarks  by  law  writers.  Mr.  Jones  says  very 
pointedly:  "  In  great  commercial  communities  the 
rules  of  the  Common  law  with  reference  to  pledges 
by  factors  have  gradually  yielded  to  the  necess- 
ities of  modern  trade  and  new  methods  of  conduct- 
ing business.  But  legislation  has  been  necessary 
to  effect  a  change  of  the  law,  and  so  strong  has  been 
the  judicial  preference  for  the  rules  of  the  Common 
law  that  the  le^rislation  intended  to  change  them  has 
sometimes  been  construed  so  as  to  defeat  the  object 
intended  to  be  accomplished  by  it.  But  in  England, 
and    in    several    of  the   more    important    commercial 


*  Post:  Sec.  498  et  seq.,  4S2,  487,  352. 
f  Post:  Sec.  512. 


352  The  Law  of  Pledge. 

States  of  our  own  country,  legislation  has  effected  an 
important  change  in  respect  to  the  powers  of  factors 
in  favor  of  persons  dealing  with  them  in  good  faith. 
The  rule  has  become  quite  generally  established  that 
a  factor  intrusted  with  the  insignia  of  title,  may  sell 
or  pledge  the  property  and  effectually  bind  his  prin- 
cipal. In  reference  to  warehouse  receipts,  legislation 
has,  in  several  States,  in  another  way  protected  bona 
fide  holders  of  such  receipts,  and  this  by  making 
them  negotiable  with  the  qualities  of  negotiable 
paper."  ^ 

401.  We  have  seen  the  uselessness  of  this  provision 
of  the  law  in  Louisiana,  resulting  from  the  preference 
of  the  Court  for  the  rule  of  non-negotiability  of  ware- 
house receipts  of  the  Common  law. 

We  must  be  permitted  to  add  that  all  such  inter- 
ference of  the  judiciary  with  the  legislative  will  is  to 
be  seriously  regretted.  The  wants  of  the  people  are 
better  known  by  their  representatives  in  the  Legisla- 
tures, especially  those  of  a  commercial  community. 
It  is  neither  wise  nor  proper  for  judges  to  check  the 
tendency  of  legislation,  or  to  impede  the  course  of 
law  by  interpreting  them  too  narrowly.  Such  action 
of  the  courts  has  a  nefarious  effect  upon  the  com- 
merce of  the  country,  and  often  interferes  with  its 
prosperity. 

402.  The  Factors'  Act  of  the  State  of  New  York, 
intended  to  protect  innocent  parties  dealing  with  fac- 
tors or  other  agents,  and  taking  from  them  pledges  of 

*  Jones,  on  Pledges,  Sec.  343. 


Pledge  of  Warehouse  JKeceipts.  353 

warehouse  receipts,  has  been  variously  construed  by 
the  courts,  and  in  most  cases  was  held  to  protect 
rather  the  true  owner  than  the  pledgee. 

In  the  case  of  Cartwright  vs.  Wilmerding,  24  N. 
Y.  526,  the  court  compared  the  act  with  the  English 
statute,  and  decided  that  the  innocent  pledgee  of 
warehouse  receipts  fraudulently  disposed  of  by  its 
agents  had  a  better  right  under  the  law  than  the  true 
owner.  The  court  said :  "Since  the  passage  of  the 
statute  there  is  no  legal  need  of  saj'ing  that  any  of 
the  documents  named  in  the  acts  give  the  holder  con- 
structive possession  of  the  property ;  for  the  statute, 
when  it  calls  them  '  documentary  evidence  of  title,' 
makes  them  equal  in  validity  to  possession,  and  leaves 
us  to  call  them  what  they  are,  with  the  same  legal 
effect  as  if  we  gave  to  the  facts  the  former  des- 
ignation^ which  is  descriptive  of  their  legal  effect.  In 
brief,  the  effect  of  the  statute  seems  to  be  that  he  who 
has  such  documentary  evidence  of  title  as  gives  him 
the  exclusive  control  of  the  possession  shall  be  held 
the  true  owner  of  the  property  for  certain  purposes, 
provided  the  true  owner  has  entrusted  him  with  such 
evidence  for  the  purpose  of  disposing  of  the  prop- 
erty. A  factor  so  situated  can  sell  or  pledge  the  whole 
or  any  part  of  the  property,  or  give  upon  it  any  lien 
or  security  for  advances,  or,  in  short,  treat  it  as  his 
own.  Entrusted  with  the  disposing  control,  he  can 
exercise  that  control ;  and  if  he  misappropriates  the 
property  or  its  avails  his  principal  must  suffer — not 
the  person    who   has  dealt  with   the    factor     '  on   the 


354  The  Law  of  Pledge. 

faith '    of    the    position    in    which    the    principal    has 
placed  him." 

And  again:  "But  our  statute  departed  entirely 
from  the  Common  law,  and  by  making  a  factor's 
possession  such  evidence  of  ownership  as  to  enable 
him  to  do  all  acts  which  the  true  owner  might,  mani- 
fested a  totally  different  intent  from  that  of  the  Eng- 
lish act.  Substantially,  it  left  an  owner  to  use  his 
precautions  when  he  selected  his  factor,  thereafter 
leaving  him  to  be  responsible  for  the  acts  of  his  agent 
and  protecting  a  bona  fide  third  person  in  an}-  trans- 
action fairly  effected  with  the  apparent  owner.  And, 
for  the  benefit  of  trade,  the  statute  said  that  the  delays 
incident  to  following  up  the  line  of  title,  and  the  ex- 
tent of  authorit}^,  might  be  dispensed  with,  except  so 
far  as  the  statute  itself  retained  them  ;  that  is,  as  to 
bailees  receiving  goods  for  carriage. 

"  That  the  course  of  trade  reall}'  called  for  such  an 
act  as  ours  is,  upon  this  construction,  is  made  clear  by 
the  course  of  English  legislation  on  the  same  sub- 
ject. Immediately  upon  the  decision  in  INIeeson  & 
Welsby  (above  cited).  Parliament  passed  an  act  (5  and 
6  Vic,  C.  89),  giving  the  same  effect  to  a  factor's 
actual  possession  as  our  act  gives.  And  in  the  same 
spirit,  and  as  it  were  for  the  very  purpose  of  prevent- 
ing the  force  of  the  prior  decisions  on  the  point  of 
"  intrusting''''  documents, etc.,  a  section  of  that  act  pro- 
vides that  an  agent  possessed  of  any  of  the  documents  of 
title  mentioned  in  the  act,  "  whether  derived  immedi- 
ately from  the  owner  of    such  goods,  or  obtained  by 


Pledge  of  Warehouse  Receipts.  355 

reason  of  suck  agenf  s  having  been  intrusted  with  the 
possession  of  the  goods  represented  by  such  documents 
of  title  as  aforesaid,  or  of  any  other  documents  of  title 
thereto,  shall  be  deemed  and  taken  to  have  been 
entrusted  with  the  possession  of  the  goods  represented 
by  such  documents  of  title  as  aforesaid ;  and  all  con- 
tracts pledging,  or  giving  a  lien  upon,  such  document 
of  title  as  aforesaid,  shall  be  deemed  and  taken  to  be, 
respectively,  pledges  of  and  liens  upon  the  goods  to 
which  the  same  relates,"  etc.  ;  "  and  an  agent  in  pos- 
session as  aforesaid  of  such  goods  or  documents  shall 
be  taken^  for  the  purposes  of  this  act,  to  have  been 
intrusted  therewith  by  the  owner  thereof,  unless  the 
contrary  can  be  shown  in  evidence  "  (9  Mees.  & 
Welsh.  650,  note).  This  act  not  only  comes  up  to 
ours,  but  overrules  (by  the  Legislature)  the  decisions, 
then  seen  to  be  inconsistent  with  the  fundamental 
principle  of  this  new  act.  Of  necessity,  these  decis- 
ions have  no  force  under  our  act."* 

In  that  case  the  goods  had  been  consigned  from 
England  by  the  owners  to  parties  in  New  York,  who 
were  instructed  to  pay  the  duties  on  them,  but  not  to 
deposit  them  in  warehouses.  The  consignees,  hold- 
ing the  invoices,  warehoused  the  goods  contrary-  to 
orders,  and  pledged  the  warehouse  receipts  to  secure 
advances  made  to  them  on  the  same. 

The  Court  held  that  the  warehouse  receipts  were 
sufficient  evidence  of   possession   and  authority  in  the 

*  Cartwrlght  vs.  Wilinerdin,  24  N.  Y.  .530  and  532. 


356  The  Law  of  Pledge. 

pledgeors  to  validate  the   pledge  under  the  New  York 
Factors'  Act. 

403.  But  in  the  more  recent  case  of  Soltau  vs.  Ger- 
dau,  119  N.  Y.  380,  in  which  the  facts  strongly  re- 
sembled those  of  Cartwright  vs.  Wilmerding,  the  de- 
cision went  the  other  way,  and  the  honest  pledgee  of 
the  warehouse  receipts  was  defeated  b}'  the  true 
owner,  whose  goods  had  been  fraudulently  pledged 
by  the  agent.  The  owner  in  that  case  had  given  his 
agent  a  delivery  order  to  enable  him  to  receive,  sell 
and  deliver  the  goods.  Thus  having  possession  of 
them  the  agent  deposited  them  in  a  warehouse  in  his 
own  name  and  pledged  the  warehouse  receipts  to 
secure  his  own  debt.  He  therefore  had  obtained  the 
documents  of  title,  the  warehouse  receipts,  clearly 
from  having  been  entrusted  by  the  o~u?ter  with  the 
possession  of  the  goods  ^  in  the  words  of  the  statute. 

The  owner  of  the  goods  claimed  them  from  the 
pledgee.  The  Court  held  that  the  Factor's  Act  did 
not  protect  the  pledgee,  though  he  was  in  good  faith 
and  innocent  of  the  factor's  fraud,  because  the  factor 
could  not  be  said  to  have  been  entrusted  ivith  the  pos- 
session of  the  goods  \\\\hQ  sense  of  the  statute.  Said  the 
Court  in  speaking  of  the  larceny  committed  by  the 
agent : 

"  An  owner  who  is  deprived  of  his  property  by 
theft  is  guilty  of  no  act  upon  which  another  has  the 
right  to  rely,  and  can  not  in  law  be  said  to  intrust  the 
thief  with  his  property.''      The  reflection  is  illogical. 


Pledge  op  Warehouse  Receipts.  357 

The  master  who  is  robbed  by  a  confidential  servant 
has  clearly  entrusted  a  thief  with  his  property.* 

404.  It  is  difficult  to  reconcile  those  two  cases  arising 
under  the  same  law,  under  similar  circumstances,  and 
in  both  of  which  the  owner  of  the  goods  had  entrusted 
his  property  and  the  evidence  of  his  owners^hip  to  a 
dishonest  agent.  The  decision  in  the  latter  case 
makes  no  mention  of  the  former  one,  in  which,  how- 
ever, the  reasoning  of  the  court  seems  to  be  the  more 
forcible  and  convincing  of  the  two.  It  is  well  to 
observe  also  that,  in  the  latter  case,  three  of  the  judges, 
and  not  the  least  distinguished  of  the  court,  dissented. 

The  decision  in  Cartwright  vs.  Wilmerding  gives 
to  the  statute  a  more  progressive  and  enlightened 
intention  than  that  of  Soltau  vs.  Gerdau.  In  the 
former  case,  the  Court  said:  "  The  English  statute, 
and  our  own,  were  manifestly  passed  for  the  purpose 
of  increasing  the  facilities  of  trade,  by  legalizing  and 
explaining  the  cases  in  which  a  party  could  sell,  or 
pledge,  property  at  sea,  in  the  ship  at  dock,  or  lying 
in  the  warehouse  subject  to  the  payment  of  duties. 
Historically,  the  ifecessities  of  trade  and  the  custom 
of  merchants  had,  in  both  countries,  anticipated  the 
statutes.  And  the  benefits  of  the  statutes  and  the 
custom  are  too  evident,  and  too  great,  to  allow  us  to 
narrow  the  construction  of  the  law.  And  there  is  no 
sound   principle  which  would   oppose   a   liberal  view, 


*  Soltau  vs.  Gerdau,  119  N".  Y.  380,  392. 
Rowland  vs.  Woodruff,  60  N.  Y.  73. 
Collins  vs.  Kalli  et  ah,  85  N.  Y.  637. 
Uentz  vs.  Miller,  94  N.  Y.  64. 


358  The  Law  of  Pledge. 

tending  to  enlarge  the  facilities  of  transfer;  since 
these  acts  but  follow  out  the  general  rule,  that  every 
man  is  bound  to  take  care  not  to  select  an  agent  who 
will  do  acts  to  injure  other  persons."  * 

405.  Warehouse  receipts  and  bills  of  lading  as  rep- 
resentatives of  property,  and  as  means  of  security  in 
commercial  transactions,  being  closely  connected  and 
made  the  subject  of  the  same  legislation,  where  they 
are  governed  by  statutes,  it  is  difficult  to  separate 
them  in  the  examination  of  the  authorities  bearing 
upon  them.  They  relate  also  to  the  pledges  by  fac- 
tors, and  we  shall  therefore  continue  the  considera- 
tion of  the  subject  in  subsequent  chapter  on  Pledges 
b}^  Factors. 

406.  In  the  meantime  we  may  observe  that  there 
is  another  exception  to  the  rule  that  warehouse  receipts 
are  not  by  the  Common  law  negotiable  to  the  extent 
of  protecting  the  pledgee  against  the  true  owner  of 
the  goods,  and  that  is,  when  the  true  owner  has  him- 
self put  the  hidicia  of  ownership  on  his  agent  and 
has  thereby  enabled  him  to  deceive  third  persons.  In 
that  case  the  true  owner  is  estopped  from  contesting 
the  rights  of  the  pledgee,  f 

This  principle  applies  equally  to  bills  of  lading  and 
to  all  cases  in  which  the  owner  of  personal  property 
has  put  on  another  person  the  indicia  of  ownership. 


*  Cartwright  vs.  Wilmerding,  24  N.  Y.  529. 
t  Moore  vs.  Kidder,  106  N.  Y.  32. 

Gibson  vs.  Stevens,  8  How.  384. 

Chicago  Dock  Co.  vs.  Foster,  48  III.  507. 

Ditson  vs.  Randall.  33  Me.  202. 

Hazard  vs.  Fiske,  83  N.  Y.  287. 


Pledge  op  Warehouse  Receipts.  359 

407.  The  rule  has  become  axiomatic  by  repeated 
adjudications.  It  is  plainly  stated  by  Lord  Herschell 
in  a  recent  case.  "  The  general  rule  of  the  law  is, 
that  where  a  person  has  obtained  the  property  of 
another  from  one  who  is  dealing  with  it  without  the 
authority-  of  the  true  owner,  no  title  is  acquired  as 
against  that  owner,  even  though  full  value  be  given, 
and  the  property  be  taken  in  the  belief  that  an 
unquestionable  title  thereto  is  being  obtained,  unless 
the  person  taking  it  can  show  that  the  true  owner  has 
so  acted  as  to  mislead  him  into  the  belief  that  the  per- 
son with  the  propertv  had  authority  to  do  so.  If  this 
can  be  shown,  a  good  title  is  acquired  by  personal 
estoppel  against  the  true  owner."* 

We  have  chosen  this  authority  among  so  many  on 
the  same  subject  because  it  shows  that  the  principle  is 
not  limited  to  cases  in  which  the  owner  has  actually 
clothed  his  agent  with  documents  of  title  or  other  evi- 
dence or  hidicia  of  ownership ;  but  that  any  act  or 
conduct  on  the  part  of  the  owner  by  which  a  third 
person  is  misled  as  to  the  real  ownership  of  the  prop- 
erty in  the  hands  of  an  agent  will  estop  the  owner 
from  denying  the  power  of  the  agent  to  dispose  of  the 
property. 


London  Joint  Stock  Bank  vs.  Simmons,  Law  Reports,  Appeal 
Cases,  1892,  p.  215. 


CHAPTER    XXXIII. 

408.  We  must  note  that  the  legislation  alluded  to 
of  several  States  of  the  Union  and  of  England  by 
which  the  pledgees  of  warehouse  receipts  are  to  be 
protected,  when  in  good  faith,  even  against  the  true 
owner  of  the  goods,  under  certain  circumstances,  is 
analogous  to  that  of  France  on  the  same  subject. 
There,  the  person  who  deposits  merchandise  in  a 
general  warehouse  can  demand  of  t?ie  warehouseman 
both  a  receipt  and  a  warrant  (so  called  in  the  French 
statute),  annexed  to  the  receipt.  These  documents 
state  the  names,  profession  and  domicile  of  the  de- 
positor, the  nature  of  the  merchandise  and  all  neces- 
sary indications  to  establish  their  identity  and  deter- 
mine their  value. 

The  ivarrant  enables  the  depositor  of  the  goods  to 
pledge  them  without  removing  them  from  the  ware- 
house and  without  any  trouble.  The  pledge  is  effected 
by  the  endorsement  of  the  warrant  indicating  the  date 
of  the  transaction,  the  amount  of  the  principal  and 
interest  of  the  debt  secured,  the  time  of  its  maturity, 
the  names,  profession  and  domicile  of  the  creditor. 
The  possession  of  the  goods,  without  which  the  pledge 
would  be  invalid,  is  then  transferred  constructively  to 
the  pledgee  by  delivery  of  the  warrant  and  held 
vicariously  by  the  warehouseman  for  account  of  the 
pledgee.     This    constructive     possession    is    provided 


362  The  Law  of  Pledge. 

for  by  Art.  92  of  the  Code  de  Commerce,  which 
states  that  the  creditor  is  reputed  to  have  the  goods 
in  his  possession  when  they  are  at  his  disposition  in 
his  stores,  or  ships,  in  the  custom  house,  or  i?i  a 
public  warehouse ^  or  if,  before  they  arrive,  they  are 
transferred  to  him  by  a  bill  of  lading.  * 

The  same  law  prescribes  that  the  first  assignee  of 
the  warrant  should  have  the  endorsement  on  it  re- 
corded on  the  books  of  the  warehouse,  with  all  the 
particulars  stated  in  the  endorsement,  and  that  the 
warrant  should  bear  upon  itself  the  certificate  of  its 
having  thus  been  recorded  on  the  books  of  the  ware- 
house. The  object  of  the  registration  is,  as  in  all 
cases  of  registry,  to  give  ^  notice  of  the  pledge  to  third 
persons.  In  default  of  such  registration  the  creditors 
of  the  depositor  of  the  goods  in  the  warehouse  could 
validly  attach  them  and  defeat  the  lien  of  the  pledgee. 
The  registration  of  the  warrant  prevents  also  the  de- 
positor from  selling  the  goods  or  withdrawing  them 
from  the  warehouse,  which  he  could  otherwise  do,  as 
he  still  retained  the  warehouse  receipt  after  parting 
with  the  warrant. 

The  pledgee  of  the  warrant,  who  is  naturally  the 
pledgee  of  the  goods,  can  have  those  sold  under  the 
terms  provided  by  the  Code  de  Commerce,  after  a 
notice  of  eight  days  to  the  debtor  and  in  the  mode 
prescribed  by  Art.  93  of  the  same  Code  de  Commerce, 
as  we  have  seen  before. 

The    warrant   is   negotiable   and   passes   by   subse- 

*  Code  de  Commerce,  Art.  92. 


Pledge  of  Warehouse  Receipts.  363 

quent  endorsements,  which  need  not  be  registered  as 
the  first  one.  And  in  case  the  sale  of  the  goods  does 
not  produce  enough  to  satisfy  the  debt,  the  pledgee 
has  a  right  of  action  against  the  endorsers  personally, 
beginning  with  the  depositor,  who  is  the  first  endorser 
of  the  warrant.* 

We  see,  therefore,  that  the  French  law  of  ware- 
house receipts  is  substantially  the  same  as  that  of  this 
country,  but  more  definite  and  precise,  and  giving 
more  complete  rights  to  the  pledgee  of  them 

We  see  also  that  the  warrant  which  accompanies 
the  warehouse  receipt  is,  to  all  intents  and  purposes, 
a  commercial  and  negotiable  paper.  And  we  see 
finally  that  the  French  commercial  law  concords  in 
this  matter  with  the  general  and  fundamental  prin- 
ple  of  the  law  of  France  and  some  other  countries  of 
continental  Europe,  relative  to  movable  or  personal 
property,  that  the  possession  of  such  property  is 
equivalent  to  title,  as  expressed  in  the  maxim  Mobilia 
nofi  habe7it  sequellani. 


♦  Loi  du  28  Mai.  1S58. 
Baudry-Laeantinerie,  Nantissement,  Sec.  100  el  seq. 
Pont.  Nantissement,  fcjec.l'ill. 


CHAPTER   XXXIV. 

Pledge  of  Corporate  Stock. 

409.  It  is  now  settled,  both  by  the  jurisprudence  of 
the  Common  law  States  and  by  the  statutes  of  the 
Civil  law  countries,  that  shares  of  corporate  stocks 
may  be  the  subject  of  a  pledge.  But,  formerly  and 
for  a  long  time,  it  was  doubtful  whether  stocks  could 
be  pledged  at  all,  and  there  was  a  great  diversity  of 
opinions  and  adjudications  of  the  courts  in  that  respect. 
It  seems  strange  at  the  present  day  that  there  should 
ever  have  been  a  question  on  that  subject ;  and  the 
uncertainty  of  the  former  jurisprudence  in  regard  to 
it  can  only  be  accounted  for  by  the  fact  that  private 
corporations  and  joint  stock  companies  did  not  have 
then,  either  in  this  country  or  in  Europe,  the  impor- 
tance which  they  have  acquired  within  the  last 
fifty  3'ears.  There  ma}-  still  be  questions  as  to  the 
modes  and  effects  of  the  pledge  of  stock ;  but  there 
are  none  as  to  the  principle  that  that  kind  of  property 
may  legally  be  pledged.  Both  in  the  Civil  and  Com- 
mon law  countries,  all  personal  or  movable  property 
may  be  pledged,  if  possession  of  it  can  be  transferred  to 
the  pledgee,  either  actually  or  symbolically.  The 
symbolical  possession  of  corporeal  property  consists 
in  holding  the  title  of  it  or  its  muniment  of  title. 
The  title  to  corporate  stock  is  the  certificate  of  shares 
of  the  stockholder.     The  transfer    of  the  certificate  is 


366  The  Law  op  Pledge. 

equivalent,  therefore,  to  the  deUvery  of  possession  of 
the  stock.  That  was  the  cause  of  so  much  doubt,  in 
former  days,  as  to  the  legal  possibility  of  pledging 
stocks.  It  was  thought  that,  inasmuch  as  possession 
could  not  be  given  to  the  pledgee  without  transferring 
the  stock  to  him  in  writing  on  the  books  of  the  com- 
pany, and  such  transfer  having  for  its  effect  to  pass 
the  title  or  general  property  to  the  transferee,  the 
transaction  might  constitute  a  mortgage  but  not  a 
pledge.  In  none  of  its  various  branches  has  the  law 
of  pledge  taken  such  a  long  stride  in  its  modern 
development  as  in  the  mode  of  assignment  of  the 
pledgeor's  rights  to  the  pledgee,  for  the  purpose  of 
securing  a  debt,  by  means  of  a  pledge,  without  trans- 
ferring the  ownership,  or  passing  the  general  prop- 
erty of  the  thing  pledged.  Such  an  assignment  to 
the  pledgee  is,  in  reality,  the  most  common  mode  of 
pledge  of  choses  in  action  and  incorporeal  things,  at 
the  present  hour,  in  this  country. 

410.  The  assignment  or  transfer  of  the  legal  title 
of  choses  in  action  and  incorporeal  things  is  not  only 
necessary  to  put  the  pledgee  in  symbolical  possession 
of  the  pledge,  but  it  is  also  necessary  to  give  him  full 
control  of  it,  and  to  enable  him  to  enforce  the  contract 
and  realize  its  benefit  by  sale  or  otherwise.  The 
same  object  is  had  in  view,  and  the  same  result  is 
obtained,  by  the  adoption  of  the  form  of  a  sale  for 
the  purpose  of  a  pledge,  as  we  have  seen  before. 
This  is  equally  permissible  and  valid  under  the  rules 
of  the  Civil  and  Common  law,  so  far  as  the  parties  to 


Pledge  of  Corporate  !Stock.  367 

the  contract  are  themselves  concerned,  whatever  rights 
third  persons,  or  creditors  of  the  pledgeor,  may  have 
to  dispute  with  the  pledgee  his  lien  on  the  property 
pledged.  In  all  such  transactions,  there  is  clearly  a 
simulated  sale,  in  this,  that  the  ownership  of  the 
property  remains  in  the  pledgeor,  and  that  the  contract 
is,  in  reality,  one  of  security.  But,  when  the  parties 
resort  to  this  process  without  fraud,  or  injury  to  others, 
it  is  not  unlawful.  There  is  nothing  more  or  less  in 
the  assignment  of  stock  to  the  pledgee. 

411.  It  is  curious  to  observe  in  connection  with  the 
progress  of  jurisprudence  on  this  subject  the  complete 
revulsion  of  legal  authorities  from  the  original  ideas 
that  stocks  could  be  mortgaged,  but  could  not  be 
pledged.  Nowhere  can  we  find  the  fact  so  well 
shown  as  in  the  following  paragraph,  which  I  tran- 
scribe from  the  excellent  treatise  of  Mr.  Cook  on  stock 
and  stockholders  :  "  Shares  of  stock  may  be  the  sub- 
ject of  a  mortgage  or  pledge.  A  mortgage  of  stock, 
however,  is  not  often  made,  and  unless  there  is  a  clear 
intent  to  the  contrary  the  courts  will  treat  the  transac- 
tion as  a  pledge  rather  than  a  mortgage.  In  fact,  it 
is  difficult  to  ascertain  from  the  cases  how  shares  of 
stock  may  be  mortgaged,  and  certain  transactions 
which  in  a  few  early  decisions  were  held  to  be  mortgages, 
would  to-day  be  held  to  be  pledges.  There  are 
but  few  clear  cases  of  a  mortgage  of  stock  to  be 
found.  It  seems  that  a  formal  instrument  of 
chattel  mortgage  of  stock,  duly  executed  and  regis- 
tered at  the   municipal    clerk's    office    as  required   by 


368  The  Law  of  Pledge. 

law  i»n  case  of  chattel  mortgages,  would  not  constitute 
an  effectual  mortgage  of  stock,  and  the  mortgagee 
would  not  be  protected  where  he  does  not  receive  the 
certificate  of  stock  from  the  mortgagor,  or  does  not 
obtain  a  registry  of  transfer  on  the  corporate  books. 
Where,  on  the  other  hand,  the  certificate  of  stock  is 
delivered  to  the  creditor  as  security,  it  is  evident 
that  possession  of  the  property  is  given  to  the  creditor, 
but  that  the  debtor  still  considers  the  stock  to  be  his. 
Such  a  transaction  is  a  pledge,  and  not  a  mortgage, 
and  consequently,  since  the  giving  of  stock  certificates 
as  security  is  almost  invariably  effected  by  a  delivery 
of  the  certificate,  a  mortgage  of  stock  may  be  said  to 
be  possible,  but  not  probable,  or  even  sensible.  The 
delivery  of  a  certificate  of  stock  with  a  blank  power  of 
attorney,  as  collateral  security,  constitutes  a  pledge 
and  not  a  mortgage,  and  the  same  rule  pro- 
vides even  though  an  absolute  transfer  or  registry  is 
made  on  the  corporate  books."  ^ 

412.  Whether  it  is  necessary  for  the  validity  of  a 
pledge  of  stock  that  the  transfer  should  be  made  or 
recorded  on  the  books  of  the  corporation,  independ- 
ently of  the  delivery  of  the  certificate  of  choses  to  the 
pledgee,  with  or  without  an  endorsement  in  blank 
upon  it,  seems  to  be  yet  a  very  doubtful  question  in 
the  Common  law  States,  in  the  absence  of  statutory 
provisions.  A  judge  of  great  learning  and  legal  acu- 
men, in  passing  upon  this  point  still  recently  said 
that  there  is  no  doubt  that,  to  constitute  a  valid  pledge 

*  Cook,  on  tUe  Law  of  Stock  and  Stockholders,  Sec.  464. 


Pledge  of  Corporate  Stock.  369 

of  stock,  there  must  be  some  written  transfer  or  con- 
tract, necessary  as  against  third  parties  in  the  absence 
of  statutory  provisions ;  that  the  mere  handing  of  the 
certificate  is  not  sufficient ;  that  there  must  be  a  trans- 
fer on  the  books  of  the  company,  or  a  power  of 
attorney,  or  some  assignment  or  contract  in  writing, 
by  which  the  holder  may  assert  title  and  compel  the 
transfer ;  and  thatthe  only  State  where,  he  is  informed, 
delivery  of  the  certificate  of  stock  is  sufficient,  is 
Louisiana,  and  there  only  by  express  provisions  of  the 
Code.* 

413.  A  writer  of  high  authority,  Mr.  Waterman, 
is  of  the  same  opinion,  and  thinks  that  no  pledge  of 
stock  is  valid,  at  least  as  against  creditors,  without 
such  delivery  as  will  be  shown  by  clothing  the  pledge 
with  the  usual  indicia  of  ownership  ;  and  that  until  a 
transfer  is  recorded  or  is  entered  of  record,  there  is 
no  such  change  of  possession  as  will  prevail  against 
an  attaching  creditor,  unless  in  cases  where  due  dili- 
gence has  been  used  to  make  the  record,  and  the  at- 
tachment has  intervened. f 

414.  Mr.  Cook  expresses  a  different  opinion  and 
states  that  a  pledge  of  stock  is  generally  made  by  a 
delivery  of  the  certificate  of  shares,  endorsed  in  blank 
to  the  pledgee,  and  a  memorandum  in  writing  to  the 
effect  that  the  stock  is  held  in  pledge  is  generally 
issued  and  given    to  the  pledgeor,  and  a  copy  thereof 


*  Nesbit  vs.  Macon  Bank  and  Trust  Company,  12  Fed.  Rep.   686, 

Pardee,  J. 
t  Waterman  on  Corporations,  Vol.  If,  j).  141. 


370  The  Law  of  Pledge. 

attached  to  the  certificates  of  stock.  But  he  says  also 
that,  howev^er,  a  mere  dehvery  of  the  certificate  of 
stock  endorsed  in  blank  is  sufficient  to  constitute  a 
pledge  without  any  memorandum  in  writing  to  that 
effect,  and  without  a  registr}^  of  the  same  being  made 
on  the  corporate  book.  * 

415.  The  pledgee,  therefore,  who  does  not  have 
the  stock  transferred  in  his  name  on  the  books  of  the 
corporation,  may  be  exposed  to  the  successful  seizure 
of  another  creditor,  and  to  the  loss  of  his  pledge. 
.\nd  on  the  other  hand,  the  pledgee  who  causes  such 
transfer  to  be  made  in  his  name,  is  exposed  to  the 
danger  of  succeeding  to  the  liability  of  his  transferrer 
for  unpaid  stock,  or,  under  the  national  banking  law, 
to  the  obligations  of  the  stockholders  for  an  amount 
equal  to  that  of  their  stock.  The  liability  of  such 
transferee,  even  when  he  is  only  a  pledgee  of  the 
stock,  is  no  longer  an  open  question.  It  has  been  so 
decided  by  the  highest  Court  of  this  country  in  several 
instances.f 

416.  In  the  case  of  National  Bank  vs.  Case,  99  U. 
S.  628,  the  court  held  that,  when  the  pledgee  causes 
the  stock  to  be  transferred  on  the  books  of  the  cor- 
poration in  the  name  of  an  irresponsible  party,  but  in 
reality  for  the  benefit  of  the  pledgee,  the  latter  is 
responsible    as   a    stockholder.     The  court  remarked 


*  Cook,  Stock  and  Stockholders  See.  465. 
t  Putnam  vs.  Upton,  96  U.  S.  328. 

Webster  vs.  Upton,  91  U.  S.  65. 

Sanger  vs.  Upton,  91  U.  S.  56. 

Upton  vs.  Trebllcock,  91  U.  S.  45. 

National  Bank  vs.  Case,  99  U.  S.  628. 


Pledge  op  Corporate  Stock.  371 

that,  even  In  the  EngUsh  cases  cited,  it  is  held  that, 
if  the  transfer  is  merely  colorable,  or,  as  sometimes 
coarsely  denominated,  a  sham — if,  in  fact,  the  trans- 
feree is  a  mere  tool  in  nominee  of  the  transferrer,  so 
that,  as  between  themselves,  there  has  been  no  real 
transfer,  "but  in  the  event  of  the  company  becoming 
prosperous  the  transferrer  would  become  interested  in 
the  profits,  the  transfer  will  be  held  for  naught,  and 
the  transferrer  will  be  put  on  the  list  of  contributories." 
The  court  cited  from  Thompson,  on  the  Liability  of 
Stockholders,  the  following  paragraph:  "  A  transfer 
of  shares  in  a  failing  corporation,  made  by  the  trans- 
ferrer with  the  purpose  of  escaping  his  liability  as  a 
shareholder,  to  a  person  who  from  any  cause  is  inca- 
pable of  responding  in  respect  to  such  liability,  is 
void  as  to  the  creditors  of  the  company  and  as  to 
other  shareholders,  although  as  between  the  transfer- 
rer and  the  transferee  it  was  out  and  out.'' 

417.  This  principle  is  certainly  sound  and  equita- 
ble and  prevents  injustice  being  done  to  the  creditors 
of  the  corporation  and  the  other  stockholders.  Yet 
the  Supreme  Court  of  the  United  States  has  overruled 
it  in  a  later  case,  and  decided  that  the  pledgee  of  stock 
who  had  the  stock  transferred  on  the  books  of  the 
company,  in  the  name  of  his  own  employee,  an  irre- 
sponsible party,  for  the  avowed  purpose  of  avoiding 
liability  as  a  stockholder,  could  not  be  held  as  such. 
In  that  case  the  pledgee  had  not  received  the  dividends 
on  the  stock  during  the  existence  of  the  pledge,  and 
had  allowed  the  pledgeor  to  receive    them.      Further- 


372  The  Law  of  Pledge. 

more,  the  officers  of  the  company  knew  at  the  mo- 
ment of  the  transfer  to  the  employee  that  he  was  a  mere 
nominee  of  the  pledgee  and  an  irresponsible  person. 
These  considerations  must  have  had  some  weight  on 
the  mind  of  the  court.  But  was  there  any  the  less 
an  injustice  done  by  the  transaction  to  the  creditors 
and  other  stockholders?  * 

418.  Whether  the  apparent  owner  of  the  stock  is  a 
pledgee  or  not,  is  of  no  consequence  under  the  law  of 
Conc^ress  creating:  the  national  banks  so  far  as  his  lia- 
bility  is  concerned.  The  moment  a  man  appears  on 
the  books  of  the  corporation  as  a  shareholder,  whether 
for  the  purpose  of  qualifying  as  a  director  or  for  some 
other  reason,  even  if  he  does  not  own  the  stock 
which  stands  in  his  name,  he  is  liable  as  a  share- 
holder.f 

419.  In  a  case  arising  in  Louisiana  where,  by  stat- 
ute, delivery  of  the  certificate  of  stock  to  the  pledgee, 
without  assignment,  constitutes-a  valid  pledge  even  as 
against  third  parties  and  creditors,  the  pledgee,  who  had 
had  the  transfer  of  the  stock  made  in  his  name  on  the 
books  of  the  corporation,  pleaded  in  defence  of  the 
suit  of  the  receiver  holding  him  responsible  as  a  stock- 
holder, that  he  had  caused  such  transfer  to  be  made, 
in  error  of  his  legal  rights  under  the  law  of  the  State. 
The  defence  was  decided  to  be  unavailable,  the  Court 
declaring  that  it  is  well  settled  that  one  to  whom 
stock    has    been    transferred  in    pledge    or    as  collat- 


*  Anderson  vs.  Warehouse  Company,  111  U.  S.  479. 
t  Finn  vs.  Brown,  142  U.  S.  5U. 


Pledge  op  Corporate  Stock.  373 

eral  security  for  money  loaned,  and  who  appears  on 
the  register  of  the  corporation  as  the  owner  of  the 
stock,  is,  in  the  event  of  the  insolvency  of  the  corpora- 
tion, chargeable  as  a  stockholder  for  the  benefit  of 
creditors.* 

420.  There  are  statutes,  however,  in  some  of  the 
States  by  which  the  pledgees  of  stock  do  not  incur 
the  liability  of  stockholders  by  having  the  stock  trans- 
ferred in  their  names,  or  by  which  that  liability  is 
limited  or  modified. f 

421.  It  has  been  also  established  by  jurisprudence 
that  the  parties  to  the  contract  of  pledge  may  by 
agreement  save  the  pledgee  of  corporate  stock  from 
liability  as  a  shareholder,  in  having  it  declared,  either 
on  the  certificate  of  shares  or  on  the  books  of  the 
corporation,  that  the  transfer  made  in  his  name  is 
only  for  the  purpose  of  the  pledge,  and  that  the 
transferee  is  only  a  pledgee,  and  not  the  owner  of  the 
stock.  In  such  cases,  the  pledgeor  remains  liable  as 
shareholder. ;][ 

422.  The  curious  question  was  once  raised,  whether 
the  pledgee  of  corporate  stock  pledged  by  the  corpo- 
ration itself  could  be  held  liable  as  a  shareholder, 
under  the  statute  of  Missouri,  which  provided  that 
the  stockholders  of  a  corporation,  at  its  dissolution, 
were  liable  for  its  debts ;  but  that  executors,  trustees 
and  persons  holding  the   stock  as  collateral  security. 


*  Moore  &  Janney  vs.  Jones.  3  Woods,  C.  C.  53. 
t  Am.  and  Eng.  Ency.  of  Law,  Vol.  18,  p.  701. 
X  Bank  vs.  Hingham  Company,  127  Mass.  5G3. 
Matthews  vs.  Albert,  24  Md.  .^27. 


374  The  Law  of  Pledge. 

were     exempted    from     the    liability ;  and    that  the 
pledgeors  remained  liable  as  shareholders. 

423.  The  Court  of  Missouri  held  that  the  pledgee 
of  the  stock  pledged  by  the  corporation  itself  was  not 
included  in  the  exemption,  and  had  by  transfer  of  the 
stock  to  him  incurred  the  liability  of  a  shareholder. 
The  Supreme  Court  of  the  United  States  reversed  the 
judgment  and  decided  that  the  pledgee  in  such  case 
came  within  the  exemption  of  the  statute.  This  was 
one  of  the  instances  in  which  the  Court  declared  it 
was  not  bound  to  follow  the  decisions  of  the  State 
courts. ''" 

424.  The  doctrine  of  the  liability  of  pledgees  of 
stock  of  national  banks,  to  whom  the  stock  is  trans- 
ferred on  the  books  of  the  corporation,  seems  to  have 
been  very  recently  modified  by  the  Supreme  Court  of 
the  United  States  in  a  case  of  great  importance.  At 
all  events,  the  Court  therein  lays  down  in  its  own 
words  the  following  rules,  which  may  hereafter  serve 
for  the  guidance  of  the  parties  in  transactions  of  the 
sort,  to-wit : 

That  the  real  owner  of  the  shares  of  the  capital 
stock  of  a  national  banking  association  may  in  every 
case  be  treated  as  a  shareholder  within  the  meaning 
of  Sec.  5151  ;  that  if  the  owner  transfers  his  shares  to 
another  person  as  collateral  security  for  a  debt  due  to 
the  latter  from  such  owner,  and  if  by  the  direction  or 


Burgess  vs.  Seligman.  107  U.  S.  20. 
Fisher  vs.  Seligman.  75  Mo.  13. 
Griswold  vs.  Seligman,  72  Mo.  110. 


Pledge  of  Corporate  Stock.  375 

with  the  knowledge  of  the  pledgee,  the  shares  are 
placed  on  the  books  of  the  association  in  such  way  as 
to  imply  that  the  pledgee  is  the  real  owner,  then  the 
pledgee  may  be  treated  as  a  shareholder  within  the 
meaning  of  Sec.  5151  of  the  Revised  Statutes  of  the 
United  States,  and  therefore  liable  upon  the  basis 
prescribed  by  that  section  for  the  contracts,  debts  and 
eno;ascements  of  the  association  ; 

That  if  the  real  owner  of  the  shares  transfers  them 
to  another  person,  or  causes  them  to  be  placed  on  the 
books  of  the  association  in  the  name  of  another  per- 
son, with  the  intent  simply  to  evade  the  responsibility 
imposed  by  Sec.  515 1  on  shareholders  of  national 
banking  associations,  such  owner  may  be  treated, 
for  the  purposes  of  that  section,  as  a  shareholder,  and 
liable  as  therein  prescribed ; 

That  if  one  receives  shares  of  the  stock  of  a  national 
banking  association  as  collateral  security  to  him  for  a 
debt  due  him  for  the  owner,  with  power  of  attorney 
authorizing  him  to  transfer  the  same  on  the  books  of 
the  association^  and  being  unwilling  to  incur  the  re- 
sponsibilities of  a  shareholder  as  prescribed  by  the 
statute,  causes  the  shares  to  be  transferred  on  such 
books  to  another,  under  an  agreement  that  they  are 
to  be  held  as  security  for  the  debt  due  from  the  real 
owner  to  his  creditor — the  latter  acting  in  good  faith 
and  for  the  purpose  only  of  securing  the  payment  of 
that  debt  without  incurring  the  responsibility  of  a  share- 
holder— he,  the  creditor,  will  not,  although  the  real 
owner  may,  be  treated  as  a  shareholder  within  the 
meaning  of  Sec.  5151  ;   and 


376  The  Law  of  Pledge. 

That  the  pledgee  of  personal  property  occupies 
toward  the  pledgeor  somewhat  of  a  fiduciary  relation, 
by  virtue  of  which,  he  being  a  trustee  to  sell,  it 
becomes  his  duty  to  exercise  his  right  of  sale  for  the 
benefit  of  the  pledgeor.* 

425.  Independently  of  these  general  principles  thus 
stated  by  the  Court,  it  recognized  in  that  case  the 
right  of  the  pledgee  of  the  stock,  for  the  purpose  of 
avoiding  the  liability  of  a  shareholder,  to  surrender  the 
certificates  transferred  to  him  by  the  pledgeor  and  real 
owner,  and  to  have  new  certificates  issued  to  him  by 
the  corporation  in  his  own  name,  but  as  -pledgee. 

426.  The  decision  is  clearly  of  great  importance  in 
financial  and  commercial  transactions  in  rendering  the 
use  of  corporate  stock  easier  and  safer  for  the  purposes 
of  pledge.  There  is  no  reason  why  the  rule  should 
not  apply  to  the  pledge  of  all  corporate  stocks  besides 
that  of  the  national  banks,  unless  restricted  or  pre- 
vented by  statute  in  particular  cases. 

427.  The  law  of  Louisiana  is  clear  on  the  subject 
of  the  pledge  of  stock.  It  is  contained  in  Art. 
3158  of  its  Civil  Code,  which  is  in  these  words: 
"When  a  debtor  wishes  to  pawn  promissory  notes, 
bills  of  exchange,  stocks,  obligations  or  claims  upon 
other  persons,  he  shall  deliver  to  the  creditor  the 
notes,  bills  of  exchange,  certificates  of  stock,  or  other 
evidences  of  the  claims  or  rights  so  pawned ;  and 
such  pawn  so  made,  without  further  formalities,  shall 

*  Fauly  vs.  Loan  and  Trust  Company,  165  U.  S.[.619. 


Pledge  of  Corporate  Stock.  377 

be  valid  as  well  against  third  persons  as  against  the 
pledgers  thereof,  if  made  in  good  faith." 

The  words  of  the  statute  are  too  plain  to  admit  of 
any  doubt.  When  a  debtor  wishes  to  pledge  stock, 
he  shall  deliver  to  the  creditor  the  certificate  of  the 
stocky  and  such  pledge,  without  further  formalities, 
shall  be  valid  as  well  against  third  persons  as  against 
the  pledgeor. 

It  is  evident  that,  under  the  law,  no  writing  is  nec- 
essary and  no  registry  or  transfer  of  the  stock  on  the 
books  of  the  corporation  is  required  to  affect  third  par- 
ties and  secure  the  benefit  of  his  lien  to  the  pledgee. 
The  statute  puts  stocks  on  the  same  footing  as  negotia- 
ble paper  in  regard  to  the  pledge  of  them.  This  is 
another  instance  of  the  advance  of  the  law  of  pledge 
in  modern  or  rather  recent  times  for  the  purpose  of 
facilitating  commercial  transactions  and  promoting 
commerce,  and  thereby  the  general  prosperity. 

The  Court  of  Louisiana  has  never  failed  to  apply  the 
rule,  and,  after  several  adjudications,  said  that  it  was 
time  for  it  to  declare  that  it  rested  its  decision  on  the 
principle  of  stare  decisis. 

428.  In  the  case  then  under  consideration  and  in 
the  previous  cases  there  were  two  questions  raised  by 
other  creditors  of  the  pledgeor,  claiming  that  they  were 
not  affected  by  the  pledge  of  the  stock,  because  it  stood 
yet  on  the  books  of  the  corporation  in  the  name  of 
their  debtor,  the  pledgeor,  no  transfer  of  the  stock  or 
registry  of  the  pledge  having  been  made. 

*  Pitot  vs.  Johnson  et  al.,  33  La.  An,  128G. 


378  The  Law  of  Pledge. 

429.  The  first  question  was  raised  by  the  corpora- 
tion itself,  contending  that,  under  a  provision  of  its 
charter,  its  stock  could  not  be  transferred  while  a 
matured  indebtedness  to  the  company  existed  on  the 
part  of  the  stockholder ;  and  that  third  persons  had 
notice  of  the  provision  by  the  publication  of  the 
charter. 

430.  The  second  question  was  raised  by  attaching 
creditors  of  the  pledgeor,  who  clainied  that  the  stock 
being  still  in  the  name  of  their  debtor  and  in  his  pos- 
session, as  it  was  not  transferred  to  the  pledgee,  they 
had  acquired  the  first  lien  upon  it  by  their  seizure 
under  the  rule  of  law  governing  movable  or  personal 
property. 

431.  In  answer  to  both  questions  the  court  held 
that  by  virtue  of  the  aforesaid  article  of  the  Civil 
Code  the  sale  or  pledge  of  the  stock  of  an  incor- 
porated company  is  complete,  even  as  to  third  per- 
sons, by  the  delivery  to  the  vendee  or  pledgee  of  the 
certificates  of  stock,  and  that  notice  to  the  corpora- 
tion is  not  necessary  to  the  perfection  of  the  sale  or 
pledge,  or  to  protect  the  stock  from  seizure  by  the 
vendor's  creditors,  or  from  other  rights  of  third  per- 
sons, arising  subsequently  to  the  sale  or  pledge.* 

431 .  In  a  more  recent  case  the  same  Court  declared 
that  a  clause  of  a  like  nature  in  the  charter  providing 
that  no  sale  of    the    stock  should    be   made    without 


Pitot  vs.  Johnson,  33  La.  An.  1286. 

Insurance  Company  vs.  Dry  Dock  Company,  31  La.  An.  149. 

^mith  vs.  Slaughterhoiise  Company,  30  La.  An.  1378. 


Pledge  op  Corporatje  Stock.  379 

notice  to  the  company  could  not  affect  the  rights  of 
the  pledgee.* 

432.  The  contrary  doctrine  seems  to  obtain  in  other 
States  of  the  Union  and  the  preponderance  of  author- 
ities on  this  subject  are  to  the  effect  that  the  liens 
allowed  by  statute  to  corporations  on  their  stock,  for 
debts  due  them  by  the  stockholders  in  whose  names 
the  shares  stand  on  their  books,  will  prevail  over  tlie 
claims  of  the  pledgees  of  the  stock,  who  demand  a 
transfer  in  their  names.  Such  is  the  rule,  at  all 
events,  for  debts  due  the  corporation  before  the 
pledge.  But  a  debt  created  after  notice  of  the  pledge 
would  not  be  secured  by  the  lien  on  the  stock  of  the 
debtor,  for  then  the  corporation  is  put  on  its  guard 
and  is  informed  of  the  adverse  right  of  the  pledgee. 
It  is  also  established  that  a  mere  by-law  of  the  cor- 
poration which  ■  provides  that  a  stockholder  can  not 
transfer  his  shares  without  the  consent  of  the  com- 
pany, when  he  is  indebted  to  it,  can  not  affect  a 
pledgee  in  good  faith. f 


*  Mineral  Water  Co.  vs.  Deblieux  et  al.,  40  La.  An.  155. 
t  Am.  and  Eng.  Ency.  of  Law,  Vol.  IS,  pp.  704,  705,  706. 


CHAPTER  XXXV. 

433.  The  pledgee  of  corporate  stock  is  entitled  to 
the  dividends  declared  upon  the  same,  on  the  princi- 
ple that  the  fruits  or  accretions  of  the  thing  pledged 
are  part  of  the  pledge  itself.  If  those  fruits  consist 
in  money,  as  the  dividends  of  stock,  or  the  interest 
on  bonds  or  promissory  notes,  the  pledgee  having  the 
right  to  receive  them,  has  equally  the  right  to  retain 
them,  but  he  must  credit  the  pledgeor  with  the  amount 
received.  In  that  respect,  such  fruits  belong  to  the 
pledgee,  because  they  operate  as  a  payment  of  the 
pledgeor' s  debt  pro  tanto  at  its  maturity.  If  the  fruits 
do  not  consist  in  money,  interest  or  income,  then  they 
remain  the  property  of  the  pledgeor,  to  be  surrendered 
to  him  by  the  pledgee  on  redemption  of  the  pledge. 

434.  In  order  to  entitle  the  pledgee  to  the  collection 
or  recovery  of  the  dividends,  the  corporation  must  be 
notified  of  the  pledge,  and  proper  evidence  thereof 
submitted  to  it.  But  it  is  not  necessary  that  the  trans- 
fer of  the  stock  should  be  made  in  the  pledgee's  name 
on  the  books  of  the  company.  The  right  to  receive 
the  fruits  of  the  pledge  belongs  to  the  pledgee  by  vir- 
tue of  the  contract  of  pledge.  So  much  so  that,  if  the 
pledgeor  collects  the  dividends  from  the  corporation  in 
absence  of  notice  of  the  pledge,  the  pledgee  can  com- 
pel him  to  turn  them  over  to  him.  The  pledgeor  in 
that  case  is  guilty  of  the  violation  of  the  contract  of 
pledge.     The  pledgee  has  not  only  the  right  to  receive 

3S1 


382  The  Law  of  Pledge. 

the  dividends  of  the  pledged  stock,  but  it  is  his  duty 
to  do  so  and  part  of  his  obHgation  to  take  care  of  and 
preserve  the  pledge  whilst  it  is  in  his  hands. 

435.  These  principles  are  lirmly  established  in  the 
jurisprudence  of  the  Common  law.* 

Under  the  Civil  law,  the  same  rules  are  definitely 
fixed  by  statute.  The  Civil  Code  of  Louisiana  is 
particularly  precise  on  the  subject.  Its  enactments 
are  as  follows  : 

Article  3168.  "The  fruits  of  the  pledge  are 
deemed  to  make  a  part  of  it,  and  therefore  they 
remain,  like  the  pledge,  in  the  hands  of  the  creditor; 
but  he  can  not  appropriate  them  to  his  own  use  ;  he 
is  bound,  on  the  contrary,  to  give  an  account  of  them 
to  the  debtor,  or  to  deduct  them  from  what  may  be 
due  him." 

Article  3169.  "If  it  is  a  credit  which  has  been 
given  in  pledge,  and  if  his  credit  brings  interest,  the 
creditor  shall  deduct  this  interest  from  those  which 
may  be  due  to  him ;  but  if  the  debt  for  the  security 
of  which  the  claim  has  been  given  brings  no  interest 
itself,  the  deduction  shall  be  made  on  the  principal 
of  the  debt." 

Article  3170.  "  If  the  credit  which  has  been  given 
in  pledge  becomes  due  before  it  is  redeemed  by  the 
person  pawning  it,  the  creditor,  by  virtue  of  the  trans- 
fer which  has  been  made  to  him,  shall  be  justified  in 
receiving  the  amount  and  in  taking  measures  to  re- 
cover it.     When  received  he  must  apply  it  to  the  pay- 

*  Am.  and  Eng.  Ency.  of  Law,  Vol.  IS,  p.  703. 


Pledge  of  Corporate  Stock.  383 

ment  of  the  debt  due  to  himself,  and  restore  the 
surplus,  should  there  be  any,  to  the  person  from  whom 
he  held  it  in  pledge." 

The  reason  of  this  is  that  the  object  of  the  pledge  is 
only  to  secure  the  creditor,  and  not  to  benefit  him  or 
enrich  him  in  any  manner.* 

436.  The  pledgee  of  stocks  has  the  same  right  as 
the  pledgee  of  any  other  property  to  sell  the  pledge 
without  notice  and  at  private  sale  if  it  is  so  stipulated 
between  the  parties.  It  is  even  the  general  practice  in 
commercial  affairs,  and  all  attempts  to  treat  the  sale 
in  such  cases  as  a  conversion  b}'  the  pledgee  have  failed. 
It  is  only  in  cases  where  the  pledgee,  in  default  of  an 
express  agreement  and  rel3ang  exclusively  upon  the 
usages  of  the  locality,  sold  the  stock  without  notice  to 
the  pledgeor,  that  the  Courts  held  him  guilty  of  con- 
version.f 

437.  A  certain  doctrine  has  been  established  by 
some  courts  and  accepted  by  the  law  writers,  to  the 
effect  that  the  pledgee  of  stocks  is  not  bound  to  retain 
the  specific  shares  belonging  to  the  pledgeor ;  and 
that,  provided  he  keeps  in  hand  a  corresponding 
number  of  shares  of  the  same  stock,  his  pledge  is  not 
impaired.  The  theory  of  this  rule  has  been  curiously 
stated  by  the  Court  of  Connecticut  in  the  following 
words : 

"  Shares   of  stock  have    no   individuality,  no  ease- 

*  Code  Napoleon,  Art.  2081. 

Troplong,  Nantissement,  Sec.  437. 
t  Le  Merchant  vs.  Moore,  150  N.  Y.  209. 

Williams  vs.  Trust  Company,  133  N.  Y.  <}<30. 

Thompson  vs.  Bank,  113  N.  Y.  S25. 

France  va.  Clark,  L.  R.  Chancery  Division,  1879-1880,  p.  830. 


384  The  Law  of  Pledge. 

ments.  One  share  does  not  differ  from  another  share 
of  like  stock  in  form,  characteristic  or  value.  Each 
share  represents  simply  an  undivided  proportionate 
interest  in  the  ownership  of  the  corporation.  It  en- 
titles the  owner  to  a  certain  right  in  the  management, 
profits  and  ultimate  assets  of  the  corporation,  precisely 
like  that  which  every  other  share  owner  enjoys.  Cer- 
tificates of  stock,  which  have  earmarks,  are  not  the 
stocks.  They  are  only  the  evidence  of  the  ownership 
of  the  stocks.  They  are  muniments  of  title,  like  title 
deeds.  They  have  no  value  save  as  evidence  of  the 
thing  owned,  which  has  nothing  individual,  dis- 
tinguishable or  peculiar  about  it.  Courts  have  there- 
fore said  that  no  good  reason  existed  for  requiring 
that  a  pledgee  of  stock  should  at  all  times  preserve  a 
careful  separation  of  distinguishable  certificates  con- 
nected with  each  transaction  of  pledge,  and  maintain 
the  identity  of  each  certificate  distinct  and  unbroken. 
They  have  said  that  the  essential  thing  was  that  he 
hold  at  all  times  the  required  shares  of  stock  ready  to 
be  delivered  when  called  for,  and  in  recognition  of  this 
fact  and  of  the  right  enjoyed  by  the  pledgee  to  transfer 
t*he  stocks  held  by  him  in  pledge  into  his  own  name, 
they  Irave  held  that  a  pledgee  fully  preserv^es  the  rights 
of  the  pledgeor  if  he  at  all  times  until  the  termina- 
tion of  the  pledge  retains  similar  stock  in  amount 
equal  to  that  pledged.  This  has  been  held  of  pledges 
in  their  ordinary  forms  as  well  as  of  those  incidental 
to  margin  transactions.  Nourse  vs.  Prince,  4  Johns. 
Ch.  490;   Horton  vs.  Morgan,  19  N.  Y.  170;   Gilpin 


Pledge  of  Corporate  Stock.  385 

vs.  Howell,  5  Pa.  St.  41  ;  Price  vs.  Gover,  40  Md. 
102;  Hubbell  vs.  Drexel,  11  Fed.  Rep.  115'  Cook 
on  Stock  and  Stockholders,  Sec.  469."* 

438.  The  origin  and  the  substance  of  this  jurispru- 
dence are  accurately  stated  by  Mr.  Dos  Pasos  in  his 
book  on  Stock  Brokers. f  It  appears  to  be  well 
established  both  in  this  country  and  in  England. ;|; 

439.  But  itisclearly  a  wide  departure  from  the  prin- 
ciples of  the  law  of  pledge  ;  and  the  reasons  of  the  court 
of  Connecticut,  like  those  of  the  previous  decisions,  are 
more  reasons  of  convenience  than  anything  else. 
Shares  of  stock  have  an  individuality  and  a  very  dis- 
tinct one  ;  they  are  numbered  and  bear  the  name  of 
the  owner,  and  consequently  have  an  earmark.  That 
they  represent  simply  an  undivided  interest  in  the 
assets  of  the  corporation  does  not  affect  their  own 
individual  existence  ;  nor  does  the  fact  that  they  are 
of  the  same  value  as  other  shares  of  the  same  stock. 
If  they  were  not  susceptible  of  identification  and  of  in- 
dividualization the  consequence  would  be  that  they 
would  not  be  susceptible  of  being  pledged.  The 
thing  pledged  must  be  a  thing  certain,  distinct,  defi- 
nite, identifiable  and  describable. 


*  Skiff  vs.  Stoddard,  63  Conn.  218. 

t  Dos  Pasos,  on  Stock  Brokers,  p.  141  et  seq. 

t  Langton  vs.  Waite,  6  L.  R.  Eq.  165. 

LeCroy  vs.  Eastman,  10  Mod.  499. 

Price  vs.  Gover,  40  Md.  115. 

Gilpin  vs.  Howell,  5  Pa.  St.  41. 

Horton  vs.  Morgan,  19  X.  Y.  170. 

Stewart  vs.  Drake,  4G  N.  Y.  449. 

Taussig  vs.  Hart,  58  N.  Y.  425. 

Thompson  vs.  Toland,  48  Cal.  100. 

Wood  vs.  Hayes,  81  Mass.  375. 

Worthington  vs.  Torney,  34  Md.  193. 

Colebrook,  on  Collateral  Securities,  Sec.  306  et  seq. 


386  The  Law  of  Pledge. 

That  particular  thing  must  remain  in  the  possession 
of  the  pledgee  during  the  existence  of  the  pledge.  No 
substitution  of  another  thing,  even  alike  and  of  the 
same  value,  can  be  made  to  it.  These  are  elementary 
principles.  Furthermore,  the  thing  pledged  is  in  the 
hands  of  the  pledgee  only  to  secure  him.  It  is  there 
as  a  deposit.  The  pledgee  has  no  more  right  to  sell 
and  replace  it  than  to  sell  and  replace  the  deposit. 
Where  is  there  any  law  or  principle  of  law  to  make  a 
difference  in  the  pledge  of  stock?  Even  if,  under  the 
doubtful  jurisprudence  of  the  Common  law,  the  pledgee 
has  the  right  to  use  the  pledge  for  his  own  benefit,  he 
certainly  can  not  sell  it  in  view  of  replacing  it* 

440.  The  only  plausible  reason  for  the  ruling  which 
recognizes  the  right  of  the  pledgee  of  stock  to  sell  it 
and  replace  it,  is  that  it  is  thus  tacitly  agreed  upon 
between  the  parties  ;  in  other  words,  that,  considering 
the  established  usage  of  brokers  In  similar  cases, 
there  is  an  implied  authority  from  the  customer  to  the 
broker  to  sell  or  pledge  the  stock  to  raise  money  to 
meet  his  advances  in  respect  to  the  transaction  with 
the  customer,  and  that  the  latter  only  reserved  to  him- 
self a  right  to  call  for  a  retransfer  to  him  of  a  similar 
number  of  shares  on  payment  of  the  advances. 

441.  Such  was  the  principal  reason  of  Chancellor 
Kent's  judgment  in  the  early  case  of  Nourse  vs.  Prime, 
which  has  been  the  foundation  of  that  doctrine  in  the 
United  States  f 

From  the  case  of  the  broker  and  customer,  the  rule 


*  Cook,  on  Stock,  Sec.  471. 

t  Nourse  vs.  Prime,  4  Johns.  Cb.  4n0  and  7  Id.  61). 


Pledge  of  Corporate  !Stock.  387 

has  drifted  down  to  all  cases  of  pledges  of  stock.  The 
same  reason,  but  only  that  reason,  may  validate  the 
acts  of  the  pledgee  in  those  cases,  to-wit :  That  the 
custom  or  usage  of  the  locality  establishes  the  right 
of  the  pledgee  to  sell  and  replace  the  stock,  and  that 
the  custom  enters  into  and  forms  part  of  the  contract. 
If  there  is  no  such  implied  agreement  between  the 
pledgeor  and  the  pledgee  of  stock,  how  far  has  this 
contract  departed  from  its  original  principle,  which 
prohibited  the  use  of  the  pledge  by  the  pledgee  and 
assimilated  such  use  to  a  theft ;  in  the  words  of  Jus- 
tinian :  SI  creditor  -pignore  utatur  furtum  coniniittit. 

442.  The  same  question  of  the  right  of  the  pledgee 
of  stock  to  sell  and  replace  pledged  shares  by  others  of 
the  same  kind  was  raised  in  France  in  a  celebrated 
case,  to  which  we  have  already  referred,  and  was 
decided  adversely  to  the  pledgee  by  the  Court  of  Cas- 
sation. It  was  there  held,  in  substance,  that,  in  default 
of  an  agreement  to  that  effect  between  the  parties,  the 
pledgee  was  guilty  of  a  breach  of  trust,  and  that  the 
pledgeor  was  not  presumed  to  know  of  the  custom 
which  would  authorize  such  disposition  of  the  stock 
even  if  the  custom  existed.* 

443.  It  is  not  amiss  to  observe  here  that  some  of 
the  Civilians  are  of  opinion  that  the  pledgeor  may  con- 
sent to  the  substitution  of  the  stock  by  the  pledgee 
and  that  such  an  agreement  is  valid  between  the  par- 
ties, but  that,  in  such  case,  the  contract  is  no  longer 
that  of  pledge,  properly  speaking. f 


*  Ante,  Sec.  208. 

t  Laurent,  Du  Gage,  Sec.  494. 


CHAPTER  XXXVI. 

Pledge  of  Policies  of  Insurance. 

444.  Policies  of  insurance  may  be  plediJjed,  whether 
they  are  of  insurance  against  fire,  or  on  hfe,  or  of 
marine  insurance.  The  pledge  of  policies  of  insur- 
ance on  life,  especially,  is  of  frequent  use  in  the 
United  States.  Persons  who  have  no  other  property 
to  pledge  may  insure  their  lives  and  pledge  the  poli- 
cies. It  is  in  many  cases  the  last  resort  of  the  needy 
borrower.  The  policy  of  insurance  being  a  chose  in 
action  may  be  pledged  at  Common  law  by  the  simple 
delivery  of  it  into  the  hands  of  the  pledgee.  It  has 
been  decided  that  such  pledges  are  valid  even  without 
endorsement,  or  written  transfer  or  assignment.  The 
Court  of  Massachusetts  in  a  recent  case  has  again 
stated  the  rule.  It  said:  "It  is  well  settled  that 
the  deliv^ery  of  such  a  chose  in  action  as  an  insur- 
ance policy  for  a  valuable  consideration,  with  the  in- 
tent to  vest  the  title  in  the  assignee,  operates  as  a 
valid  transfer,  and  that  the  equitable  interest  thus 
acquired  by  the  assignee  will  be  protected  and  en- 
forced in  the  courts  of  law."* 

445.  But  such  is  the  rule  only  when  the  policy  is  not 
payable  to  any  particular  person  named  in  the  policy ; 
otherwise  the  endorsement  by  the  payee  as   well  as 

*  Hewins  vs.  Baker,  161  Mass.  324, 
Ellis  vs.  Kreutzinger.  27  Mo.  311. 
Grant  vs.  Kline,  115  Pa.  St.  618. 

389 


390  The  Law  of  Pledge. 

delivery  to  the  pledgee  is  indispensable  for  the  validity  of 
the  pledge.  There  seems  to  be  no  doubt  on  this  point. 
It  is  in  that  case  of  the  policy  of  insurance,  as  it  is  of 
any  other  chose  in  action  payable  to  a  person  named 
in  the  instrument.'^ 

446.  But  however  simple  and  legal  the  pledge  of 
insurance  policies  in  this  form  may  be,  and  however 
generally  adopted  it  has  been  in  the  United  States,  it 
is  more  common  in  England  to  mortgage  than  to 
pledge  life  insurance  policies ;  and  creditors  there  are 
better  satisfied  with   the  latter    mode  of  security. f 

447.  Under  the  rule  of  the  Civil  law  that  no  pledge 
is  valid  against  third  persons  unless  it  is  evidenced  by 
an  act  in  writing,  stating  the  amount  of  the  debt 
secured,  and  describing  the  property  pledged,  is  the 
pledge  of  a  policy  of  insurance  legally  effected  by 
simple  endorsement  and  delivery? 

*  Jones,  on  Pledges,  Sees.  145  and  147. 

Colebrooke,  on  Collat.  Securities,  Sec.  426. 

Am.  and  Eng.  Ency.  of  Law,  verbo  Pledge,  p.  G.ol. 

Collins  vs.  Dawley,  4  Colo.  138. 

^Norwood  vs.  Guerdon,  GO  111.  253. 

Stout  vs.  Yaeger  Milling  Company,  13  Fed.  Rep.  S02  (Mo.). 

Sherman  vs.  Fire  Insurance  Company,  46  N".  Y.  526. 

Merrifield  vs.  Baker,  11  Allen,  43. 

City  Bauk  vs.  Ass.  Company,  32  W.  R.  658. 

Crossley  vs.  Insurance  Company,  4  Ch.  D.  421. 

Webster  vs.  Insurance  Companj^  15  Ibid.  169. 

Soule  vs.  Bank,  45  Barb.  111. 

Chapman  vs.  Mcllrath,  77  Mo.  39. 

West  vs.  Insurance  Com  pan  v,  31  Ark.  476. 

Latham  vs.  Bank,  L.  R.,  17  Eq.  205. 

Bruce  vs.  Gardner,  L.  R.,  5  Ch.  32. 

*Bart  vs.  Forbes,  60  Miss.  29. 

Grain  vs.  Paine,  4  Cush.483. 

State  vs.  Tomlinson,  45  N.  E.  1116  (Ind.) . 

Insurance  Company  vs.  Grant,  33  A.  1060  (X.  J.). 

Palmer  vs.  Merrill,  6  Gush.  286. 

Currier  vs.  Howard,  14  Gray,  511. 

Norton  vs.  Bistacagua  Insurance  Company,  111  Mass.  582. 
t  Salt  vs.  Northampton,  L.  R.  Appeal  Cases  1892,  p.  1. 

Deering  vs.  Bank,  L.  R.  Appeal  Cases  1886,  p.  20. 


Pledge  of  Policies  op  Insuranxe.  391 

The  question  is  certainly  not  free  from  doubt.  The 
pledge  of  commercial  effects  is  excepted  from  the 
requirement  of  the  written  act,  as  we  have  seen  before, 
and  simple  delivery  of  the  thing  pledged,  in  such 
cases,  is  sufficient  according  to  the  various  Codes  of 
Commerce  of  the  countries  of  continental  Europe. 
But  is  a  policy  of  insurance  a  commercial  effect? 
Nothing  in  the  provisions  of  those  Codes  indicates  it 
to  be  such. 

448.  In  the  State  of  Louisiana  the  law  provides 
that:  '' When  a  debtor  wishes  to  pawn  promissory 
notes,  bills  of  exchange,  stocks,  obligations  or  claims 
upon  other  persons,  he  shall  deliver  to  the  cred- 
itors the  notes,  bills  of  exchange,  certificates  of  stock 
or  other  evidences  of  the  claims  or  rights  so  pawned ; 
and  such  pawn  so  made,  without  further  formalities, 
shall  be  valid  as  well  against  third  persons  as  against 
the  pledgers  thereof,  if   made  in  good  faith."* 

A  policy  of  insurance  does  not  come  within  the 
category  of  either  promissory  notes,  bills  of  exchange 
or  stocks.  Is  it  an  obligation  or  a  claim  upon  another 
person?  It  is  an  aleatory  obligation,  and  at  best  an 
eventual  or  contingent  claim  upon  the  insurer.  Yet 
such  a  right  may  be  the  subject  of  the  contract  of 
pledge. 

But  is  it  the  kind  of  right  which  may  be  pledged, 
under  the  article  of  the  Code,  by  a  simple  delivery  of 
the  evidence  of  the   right?     What  is  the   right  of  the 


*  Civil  Code  of  Louisiana,  Art.  3158. 


^92  The  Law  of  Pledge. 

insured  under  the  polic}'  of  insurance? — to  recover 
the  insurance  mone}^  in  case  of  loss  of  the  subject 
insured.  The  poHcy  is  only  evidence  of  the  contract, 
but  not  of  the  loss. 

We  may  find  an  analogous  case  in  the  contract  of 
an  architect  to  build  a  house.  It  creates  on  the  part 
of  the  owner  an  obligation  to  pay  the  architect  when 
the  house  is  built.  The  latter  could  pledge  his  right 
under  the  contract.  But  would  the  simple  deliverv  of 
the  contract  be  sufficient  to  effect  the  pledge?  The 
contract  is  evidence  of  his  right  to  be  paid  if  he  builds 
the  house,  but  it  is  not  evidence  that  he  has  built  it. 
A  written  act  of  pledge  would  clearly  be  necessary  to 
pledge  the  contract  in  that  case. 

Is  the  claim  of  the  insured  a  credit  ?  Clearly  not 
before  the  loss.  Is  it  a  credit  after  the  loss?  It  would 
seem  so.  But  it  is  not  a  credit  negotiable  in  the  sense 
of  the  law.  In  that  case  it  would  look  as  if  the  policy 
of  insurance  could  not  be  pledged  without  the  written 
act.  Article  3160  of  the  same  Code  provides  that: 
"When  the  thing  given  in  pledge  consists  of  a  credit 
not  negotiable,  to  enable  the  creditors  to  enjoy  the 
privilege  above  mentioned  it  is  necessary  not  only 
that  the  proof  of  the  pledge  be  made  by  authentic  act 
or  by  act  under  private  signature,  dul}'  recorded,  but 
that  a  copy  of  this  act  shall  have  been  duly  served  on 
the  debtor  of  the  credit  given  in  pledge." 

449.  The  question  so  far  does  not  seem  to  have 
drawn  the  attention  of  the  lawyers  of  Louisiana, 
though  the  pledge  of  policies  of  insurance  in  that  State 


Pledge  of  Policies  of  Insurance.  393 

is  of  frequent  use.  The  validity  of  such  pledges  by 
written  assignment,  but  not  by  an  act  stating  the 
amount  of  tlie  debt  secured,  has  never  been  contested 
on  the  ground  that  the  form  of  assignment  was  not 
sufficient.  The  form  of  such  assignment  is  usually  in 
words  endorsed  on  the  policy  to  the  effect  that,  "  for 
value  received,"  the  insured  transfers  the  polic}-  to  the 
assignee.  The  statement  of  value  received,  in  case  of 
a  sale  of  the  policy  would  be  sufficient,  because  the 
price  needs  not  be  declared  in  the  transfer.  But  in 
the  case  of  a  pledge,  the  amount  of  the  debt  secured 
must  be  stated  under  penalty  of  nullit}-.  The  terms 
assignment  or  traiisfer  are  generic.  They  may  be  ap- 
plied equally  to  a  sale,  exchange,  gift  or  pledge  of  the 
thing.  When  the  transfer  is  for  the  purpose  of  a  pledge, 
unless  it  contains  all  the  requirements  of  that  kind 
of  contract,  under  the  rule  of  the  Civil  law,  it  is  clearly 
not  sufficient.  We  should  bear  in  mind  that,  when 
the  policy  or  any  evidence  of  a  right  is  transferred  to 
the  creditor  for  the  purpose  of  security  only,  the  trans- 
ferror still  retains  the  o-vnership  of  the  thing  trans- 
ferred. If  the  ownership  itself  were  transferred^  clearly 
there  would  be  no  pledge  or  any  other  contract  of 
security.  The  transferee  could  not  have  a  lien  on  his 
own  proper t}'. 

450.  In  all  policies  of  insurance  there  is  a  clause  by 
which  the  underwriter  stipulates  the  forfeiture  of  the 
insurance  in  case  the  insured  transfers  the  policy  with- 
out the  consent  of  the  insurer.  The  contract  of  insur- 
ance  is   a   personal  one.      The   insured  has  no  more 


^94  The  Law  of  Pledge. 

right  to  substitute  another  .insured  to  himself  than  the 
insurer  has  the  right  to  substitute  another  insurer  to 
himself.     The  reason  of  this  clause  is  manifest. 

The  transfer  of  the  policy  is  equivalent  to  the  sub- 
stitution of  a  new  insured  to  the  one  with  whom  the 
insurer  has  contracted  and  whom  he  accepted  for  the 
purposes  of  the  insurance.  His  consent  to  the  change 
•  evidently  should  be  first  obtained  before  he  is  bound 
by  the  transfer. 

4:^1.  Therefore,  when  for  the  purpose  of  a  pledge, 
the  policy  is  transferred  or  assigned  to  the  pledgee 
without  the  consent  of  the  insurer,  the  latter  can 
demand  the  forfeiture  of  the  insurance,  and,  in  case  of 
loss,  if  he  has  not  waived  the  stipulation  of  the  clause, 
lie  may  refuse  payment  of  the  indemnity  both  to  the 
pledgee  and  the  insured. 

452.  But  it  is  only  the  insurer  who  can  avail  himself 
of  the  clause  of  forfeiture.  Neither  the  pledgeor  nor 
his  other  creditors  can  demand  the  nullity  either  of  the 
pledge  or  of  the  policy.  And  the  insurer  himself  can 
■claim  the  forfeiture  of  the  policy,  but  not  the  nullity  of 
the  pledge.  The  pledgee  in  that  case  is  at  the  mercy 
of  the  insurer,  but  of  him  alone,  so  far  as  the  recov- 
ery of  the  insurance  money  is   concerned. 

It  is  expressly  said  in  Merill  vs.  New  England 
Insurance  Company,  103  Mass.  245,  252,  of  a  provi- 
sion that  the  policy  should  be  null  and  void  if  assigned 
without  the  written  consent  of  the  company,  that  it 
^'  does  not  prevent  the  transferor  pledge  of  the  policy. 
It  reserves  to  the  companv  the  right  to  give  or  to  re- 


Pledge  of  Policies  of  Insurance.  395 

fuse  its  consent  to  such  transfer  ;  and,  if  made  without 
its  consent,  to  avoid  its  contract  altogether.  The  effect 
of  the  condition  is  to  defeat  the  policy  ;  not  to  defeat 
the  transfer. "  * 


*  Heevins  vs.  Batner,  161  Mass.  325. 
Lynde  vs.  Ins.  Co.,  130  Mass.  57. 
Ellis  vs.  Kreutzinger.  27  Mo.  311. 


CHAPTER   XXXVII. 

453.  In  relation  to  life  insurance  policies,  there  is  a 
great  diversity  of  opinion  on  the  subject  of  the  pledge 
and  transfer  of  the  policy  to  a  person  who  has  no  inter- 
est in  the  life  of  the  insured.  It  may  be  considered  as 
a  settled  principle  that  no  policy  can  be  validly  issued 
in  favor  of  a  person  who  has  no  such  interest.  But 
when  the  policy  has  been  originally  issued  to  a  person 
having  the  insurable  interest,  can  it  be  subsequently 
transferred  to  one  who  has  no  interest  in  the  life  of  the 
insured?  On  that  question  the  Courts  of  this  country 
are  divided  and  wide  apart. 

Life  insurance  was  at  first  unpopular.  It  had  to 
overcome  strong  prejudice  in  its  incipiency.  In  France 
and  various  countries  of  Europe  it  was  for  a  long  time 
prohibited  by  statute.  Whether  the  beneficiary  had 
an  interest  or  not  in  the  life  of  the  insured,  the  con- 
tract was  considered  a  wager  and  a  speculation  on 
human  life.  It  is  still  held  immoral,  and,  therefore, 
void,  by  some  Courts,  and  reprobated  by  some  law 
writers  whenever  the  beneficiary  has  no  insurable 
interest  in  the  life  of  the  insured. 

454.  One  of  the  law  writers  says  :  "  All  the  objec- 
tions that  exist  against  issuing  a  polic\'  to  one  upon 
the  life  of  another,  in  whose  life  the  former  has  no  insur- 
able interest,  exist  against  his  holding  such  policy  by 
mere  purchase  and  assignment  from  another.    In  either 

case  the  holder  of  such  policy  is  interested  in  the  death 

397 


398  Thc  Law  of  Pledge. 

rather  than  the  Hfe  of  tne  insured.  The  poHcv  of  the 
law  forbids  such  speculations  based  on  the  continuance 
of  human  hfe.  It  will  not  uphold  a  practice  which 
incites  danger  to  life,  and  it  substantially  declares  that 
no  one  shall  have  any  claims  under  a  policy  upon  the 
life  of  another  in  whose  life  he  had  no  insurable  inter- 
estatthe  time  he  acquired  the  policy,  whether  the  policy 
be  issued  to  him  directly  from  the  insurer,  or  whether 
he  acquired  the  policy  by  purchase  and  assignment 
from  another.  He  may  purchase  a  policy  on  the  life 
of  another  in  whose  life  he  has  no  interest,  as  a  mere 
speculation  ;  the  door  is  open  to  the  same  practice  of 
gambling,  and  the  same  temptation  is  held  out  to  the 
purchaser  of  the  policy  to  bring  about  the  event  insured 
against,  as  if  the  policy  had  been  issued  directly."* 

455.  In  France,  where  the  popular  prejudice 
against  life  insurance  lasted  longer  than  in  this  coun- 
try, the  same  views  are  entertained  by  some  of  the 
writers  on  that  subject.  One  of  them  expressed  his 
opinion  in  these  words:  "If  the  one  who  takes  an 
insurance  on  the  life  of  another  has  no  interest  in  the 
existence  of  the  latter,  the  contract  he  enters  into  will 
give  him  a  contrary  interest ;  that  is,  an  interest  in 
the  abridgment  of  the  life  of  the  insured.  It  is  no 
longer  a  question  of  social  advantage,  it  is  public 
morality  which  rises  against  such  a  combination.  The 
insurance  under  such  circumstances  contains  a  votum 
mortis.     It  is  a  speculation,  a  wager  on  human    life, 

*  May.  on  Insurance,  !Sec.  398. 


Pledgr  of  Policies  of  Insurance.  39^ 

speculation  in  wliich  the  desire  of  an  early  death  of  the 
insured  is  implied."  '" 

456.  In  Belgium  legislation  has  fixed  the  prohibi- 
tion absolutely.  The  law  provides  that :  "  The  in- 
surance on  the  life  of  a  third  person  is  null  if  it  is 
proved  that  the  beneticiarv  had  no  interest  in  the  life 
of  the  insured."  f 

457.  But,  reverting  to  the  question  of  the  validity 
of  the  assignment  to  a  person  having  no  insurable 
interest,  of  a  life  policy  originally  issued  to  one 
having  the  requii-ed  interest  in  the  life  of  the  insured, 
we  see  that  the  Supreme  Court  of  the  United  States" 
has  adopted  the  prohibitive  doctrine  and  established 
the  rule  that,  under  its  jurisprudence,  no  one  can 
have  any  right  in  a  life  insurance,  if  lie  has  no  inter- 
est in  the  life  of  the  insured,  whether  he  is  the 
original  holder  of  the  policy  or  the  subsequent 
assignee  of  it.  The  Court  stated  the  doctrine  in  the 
following  terms,  basing  its  judgment  upon  grounds  of. 
morality  and  public  policy  : 

"The  policy  executed  on  the  life  of  the  deceased, 
was  a  valid  contract,  and  as  such  was  assignable  by 
the  assured  to  the  association  as  security  for  any  sums 
lent  to  him,  or  advanced  for  the  premiums  and 
assessments  upon  it.  But  it  was  not  assignable  tO' 
the  association  for  any  other  purpose.  The  associa- 
tion had  no  insurable  interest  in  the  life  of  the 
deceased,    and   could    not   have    taken  out  a  policy  in 


*  Note  in  Journal  dn  Palais.  ISSO,  p.  1121,  eb  seq. 
t  J.aws  of  the  11th  June,  187-1. 


400  The  Law  of  Pledge. 

its  own  name.  Such  a  policy  would  constitute  what 
is  termed  a  wager  policy,  or  a  speculative  contract 
upon  the  life  of  the  insured,  with  a  direct  interest  in 
its  early  termination. 

■•It  is  not  easy  to  define  with  precision  what 
will  in  all  cases  constitute  an  insurable  inter- 
est, so  as  to  take  the  contract  out  of  the  class  of 
wager  policies.  It  mav  be  stated  generally,  how- 
ever, to  be  such  an  interest,  arising  from  the  rela- 
tion of  the  party  obtaining  the  insurance,  either  as 
a  creditor  of  or  surety  for  the  assured,  or  from 
the  ties  of  blood  or  marriage  to  him  as  will  justify  a 
reasonable  expectation  of  advantage  or  benefit  from 
the  continuance  of  his  life.  It  is  not  necessary  that  the 
expectation  of  advantage  or  benefit  should  be  always 
capable  of  pecuniary  estimation  ;  for  a  parent  has  an 
insurable  interest  in  the  life  of  his  child,  and  the  child 
in  the  life  of  his  parent ;  a  husband  in  the  life  of  his 
wife,  and  a  wife  in  the  life  of  her  husband  The  nat- 
ural affection  in  cases  of  this  kind  is  considered  as 
more  powerful — as  operating  more  efKcaciously — to 
protect  the  life  of  the  insured  than  any  other  consider- 
ation. But  in  all  cases  there  must  be  a  reasonable 
ground,  founded  upon  the  relations  of  the  parties  to 
each  other,  either  pecuniary  or  of  blood  or  afBnit)', 
to  expect  some  benefit  or  advantage  from  the  continu- 
ance of  the  life  of  the  assured. 

"Otherwise  the  contract  is  a  mere  wager  by  which 
the  party  taking  the  policv  is  directly  interested  in 
the  early  death  of  the    assured.      Such   policies  have  a 


Pledge  of  Policies  of  Insurance.  401 

tendency  to  create  a  desire  for  the  event.  They  are, 
therefore,  independently  of  any  statute  on  the  subject, 
condemned  as  being  against  pubHc  pohcy. 

"  The  assignment  of  a  pohcy  to  a  party  not  having 
an  insurable  interest  is  as  objectionable  as  the  taking 
out  of  a  policy  in  his  name.  Nor  is  its  character 
changed  because  it  is  for  a  portion  merely  of  the  in- 
surance money.  To  the  extent  in  which  the  assignee 
stipulates  for  the  proceeds  of  the  policy  beyond  the 
sums  advanced  by  him,  he  stands  in  the  position  of 
one  holding  a  wager  policy.  The  law  might  be  read- 
ily evaded  if  the  policy,  or  an  interest  in  it,  could  in 
consideration  of  paying  the  premiums  and  assessments 
upon  it,  and  the  promise  to  pay  upon  the  death  of  the 
assured  a  portion  of  its  proceeds  to  his  representatives, 
be  transferred  so  as  to  entitle  the  assignee  to  retain 
the  whole  insurance  money."  * 

45S.  The  opposite  doctrine  is  established  in  the 
State  of  New  York,  and  it  is  interesting  to  observe 
the  contrast  of  the  reasoning  of  its  court  with  that  of 
the  Supreme  Court  of  the  United  States,  contrast 
which  is  all  the  more  curious  that  both  decisions  are 
based  upon  principles  of  morality  and  public  order. 
The    Court  of    New  York    says:    "This  policy    was 


*  Warnock  vs.  Davis,  104  U.  S.  778. 
See  also  Insurance  Company  vs.  Lucks,  lOS  V.  S.  503. 
Cammack  vs.  Armstrong,  117  U.  S.  597. 
Hayes  vs.  Lapeyre,  48  La.  An.  754. 
Life  Insurance  Company  vs.  Hazzard,  41  Ind.  ll(i. 
Stevens  vs.  Warren,  101  Mass.  504. 
Bombach  vs.  Insurance  Company,  35  La.  An.  233. 
Stokell  vs.  Kimbal,  59  N.  H.  13. 
Johnson  vs.  Van  Epps,  14  Brad.  '201. 


402  The  Law  of  Pledge. 

taken  out  by  Lester,  for  the  benetit  of  liis  wife.  It 
was  an  insurance  upon  his  own  hfe  for  her  benefit. 
While  one  can  not  insure  hfe  in  which  he  has  no 
interest,  every  person  can  insure  his  own  hfe  for  any 
sum  upon  which  he  can  agree  with  an  insurance 
company.  A  hfe  insurance  is  not  hke  fire  insurance, 
a  contract  of  indemnity,  but  a  mere  contract  to  pay  a 
certain  sum  of  money  on  the  death  of  a  person  in 
consideration  of  the  due  payment  of  a  certain  annuity 
for  his  life.  (Delby  vs.  The  India  and  London  Life 
Insurance  Company,  28  Eng.  Law  and  Eq.  312  ; 
Rawls  vs.  American  Life  Insurance  Company,  36 
Barb.  357;  S.  C,  27  N.  Y.  282;  Insurance  Com- 
pany vs.  Bailey,  13  Wall.  616.)  Like  every  other 
contract  to  pay  money  such  a  policy  is  a  chose  in 
action  with  all  the  ordinary  incidents  of  every  other 
chose  in  action.  It  is  abundantly  settled  in  this  State, 
that  one  who  takes  an  insurance  upon  his  own  life 
may  make  the  policy  payable  to  any  person  whom  he 
may  name  in  the  policy,  and  that  such  person  need 
have  no  interest  in  the  life  insured,  and  that  if  the 
policy  be  valid  in  its  inception,  the  party  taking  it 
may  assign  it  to  any  person  as  he  could  assign  any 
other  chose  in  action,  and  that  the  policy  will  con- 
tinue valid  in  the  hands  of  the  assignee,  although  he 
has  no  interest  whatever  in  the  life  insured.  So 
a  creditor  may  take  out  a  policy  on  the  life  of  his 
debtor,  and  the  policy  will  contmue  valid  although 
the  creditor  has  been  paid  and  has  thus  ceased  to  have 
an  interest  in   the   life  of    the  insured.      In  Ashley  vs» 


Pledge  of  Policies  of  Insurance.  403 

Ashley  (3  Simons,  149),  A  insured  his  Hfe  and  after- 
ward assigned  the  poHcy  to  B,  for  a  nominal  con- 
sideration ;  B's  executors  then  sold  and  assigned  the 
policy  to  D  for  a  nominal  consideration,  and  then  D's 
executors  sold  it  to  E ;  and  it  was  held  that  they  could 
make  a  good  title  to  the  policy,  and  that  E  was  bound 
to  complete  his  purchase.  This  case  was  cited  and 
approved  in  3  Kent's  Coms.  370,  note,  and  has  since 
been  cited  with  approval  in  several  reported  cases  in 
this  State.  In  St.  John  vs.  The  American  Mutual 
Life  Ins.  Co.  (2  Duer,  419),  Duer,  J.,  a  judge  very 
learned  in  the  law  of  insurance,  writing  the  opinion, 
held  that  an  assignment  of  an  insurance  policy  to  one 
having  no  interest  in  the  life  insured  was  valid,  and 
he  said :  '  The  objection  to  the  recovery  in  this  case 
assumes,  and  such  was  the  argument,  that  there  can 
be  no  absolute  sale  of  a  subsisting  policy,  and  that  its 
assignment  is  only  valid  when  as  collateral  security 
for  an  antecedent  debt ;  but,  as  we  understand  the 
law,  a  written  promise  to  pay  a  sum  of  money  is  just 
as  properly  a  subject  of  transfer,  for  value,  where  it 
depends  upon  a  condition,  as  where  it  is  absolute  ;  and 
we  can,  therefore,  make  no  distinction  between  tlie 
rights  of  a  bona  fide  assignee  of  a  policy  and  those  of 
an  assicrnee  of  a  mortgratre.'  He  then  cited  Ashley 
VS.  Ashley,  and  further  said:  '  This  case,  therefore, 
proves  not  only  that  the  absolute  sale  of  a 
life  policy  does  not  affect  the  validity  of  the 
contract,  but  that  the  assignee  for  value,  in  the 
event   of  the    death   of  the   assured,    is  entitled  to  the 


404  The  Law  of  Pledge. 

same  remedies  as  his  personal  representative  when  the 
title  to  the  policy  is  unchanged.'  This  case  was 
affirmed  in  this  Court  (13  N.  Y.  31),  and  the  doc- 
trine was  there  again  announced  that  a  valid  policy 
of  insurance  effected  by  a  person  upon  his  own  life  is 
assignable,  like  an  ordinar}'  chose  in  action.  Crip- 
pen,  J.,  writing  the  opinion  of  the  Court,  said :  'I 
am  not  aware  of  any  principle  of  law  that  distin- 
guishes contracts  of  insurance  upon  lives  from  other 
ordinary  contracts,  or  that  takes  them  out  of  the 
operation  of  the  same  legal  rules  which  applied  to  and 
govern  such  contracts.  Policies  of  insurance  are  choses 
in  action,  and  are  governed  by  the  same  principles 
applicable  to  other  agreements  involving  pecuniary 
oblis^ations.'  And  he  further  said  :  '  I  do  not  agree 
with  the  counsel  for  the  defendant,  that  the  assignee 
must  have  an  insurable  interest  in  the  life  of  the 
assured  in  order  to  entitle  him  to  recover  the  amount 
of  the  assurance.  If  the  policies  were  valid  in  their 
inception,  the  assignment  of  them  to  the  plaintiff  did 
not  change  the  liability  of  the  compan}^'  In  Valton 
vs.  The  National  Fund  Life  Assurance  Company  (20  N. 
Y.  32),  it  was  held  that  one  who  has  obtained  a  valid 
insurance  upon  his  own  life  may  dispose  of  it  as  he 
seems  fit,  and  that  it  is  immaterial  that  the  assignee 
has  no  interest  in  the  life.  In  Rowls  vs.  American 
Life  Insurance  Company  (^sf/pra)  it  was  held  that  it 
is  not  necessar}'  that  a  party  holding  a  policy  on  the 
life  of  another  should  have  an  insurable  interest  in  such 
life  at  the  time  of  the   death  to    make  the  polic}'  valid 


Pledge  ob^  Policies  of  Insurance.  405 

if  it  was  valid  in  its  inception.  (See  also  Clark  vs. 
Allen,  II  R.  1. 493  ;  Law  of  Assignments  of  Life  Poli- 
cies, b}'  Hine  &  Nichols,  73,  75,  81;  Bliss  on  Life  Ins. 
(2d  ed.)  Sees.  23,  26,  30. 

"  The  rule,  as  gathered  from  these  authorities,  is 
that  where  one  takes  out  a  policy  upon  his  own  life  as 
an  honest  and  bona  fide  transaction,  and  the  amount 
insured  is  made  payable  to  a  person  having  no  inter- 
est in  the  life,  or  where  such  a  policy  is  assigned  to- 
one  having  no  interest  in  the  life,  the  beneficiary  in 
the  one  case  and  the  assignee  in  the  other  may  hold 
and  enforce  the  policy  if  it  was  valid  in  its  inception, 
and  the  policy  was  not  procured  or  the  assignment 
made  as  a  contrivance  to  circumvent  the  law  against 
betting,  gaming  and  wagering  policies.  It  follows, 
therefore,  that  one  may,  with  the  consent  of  the  in- 
surer, deal  with  a  valid  life  polic}-  as  he  could  with 
any  other  chose  in  action,  selling  it,  assigning  it,  dis- 
posing of  it  and  bequeathing  it  by  will,  and  it  has 
been  well  said  that  if  he  could  not  do  this,  life  policies 
would  be  deprived  of  a  large  share  of  their  utility  and 
value."  * 

459.  The  same  doctrine  has  been  adopted  in  sev- 
eral of  the  States  of  the  Union,  as  shown  by  the  cases 
which  we  cite  below. f 

*  Olmstead  vs.  Keyes  et  al.,  85  N.  Y.  598, 

t  Dixon  vs.  National  Life  Insurance  Company  (Mass.),  46  N.  E.  430, 

United  States  Mutual  Association,  vs.  Hodgkin,  4  App.  D.  C.  510. 

Meyers  vs.  Schumann,  54  N.  J.  Eq.  414. 

Mutual  CkjBipany  vs.  Allen,  138  Mass.  24, 

Eckel  vs.  Renos,  41  Ohio  St,  232. 

Martin  vs.  Stebbins,  120  111.  387. 

Fitzpatrick  vs.  Insurance  Company,  50  Conn,  116. 

Ritter  vs.  Smith,  70  Md.  201. 

Murphy  vs.  Red  (Miss.).  14  So.  Rep.  701, 


406  The  Law  of  Pledge. 

460.  The  principle  underlying  this  doctrine  is  that 
the  contract  of  life  insurance  is  not,  like  that  of  fire 
or  marine  insurance,  a  contract  of  indemnity,  but  is 
an  ordinary  agreement  to  pay  a  certain  sum  of  money, 
under  certain  circumstances,  and  for  a  certain  consid- 
eration. Were  it  a  contract  of  indemnit}-,  when  the 
policy  is  transferred  as  collateral  security,  it  is  clear 
that,  if  the  debt  thus  intended  to  be  secui-ed  were  paid 
before  the  death  of  tlic  insured,  or  maturity  of  the 
policy,  the  pledgee  could  haye  no  right  to  the  insur- 
ance money;  there  being  no  damage  suffered  by  him 
from  the  death  of  the  insured,  there  would  be  no 
ground  for  an  indemnity. 

461.  For  a  long  time  in  England  the  prevailing 
doctrine  was,  that  life  insurance  was  nothing  else  but 
a  contract  of  indemnity,  and,  therefore,  that  when 
the  insurance  was  taken  by  a  creditor  on  the  life  of 
his  debtor,  payment  of  the  debt  by  the  representa- 
tives of  the  debtor  caused  the  policy  to  lapse,  and 
extinguished  the  right  or  cause  of  action  against  the 
insurer.  The  principle  was  supported  b}'  no  less  an 
authority  than  Lord  Ellenborough,  who  said  in  the 
then  leading  case  of  Godsall  vs.  Boldero,  that,  if  the 
damage  which  was  at  first  supposed  likel}-  to  result 
to  the  creditor  from  the  death  of  his  debtor,  the 
insured,  was  wholly  obviated  by  payment  of  the  debt, 
the  foundation  of  any  action  on  the  gronnd  of  such 
insurance  failed.* 

462.  But  this  decision  has  been  expressly  overruled 

*  Godsall  vs.  Boldero,  9  East,  72. 


Pledge  of  Policies  of  Insurance.  407 

by  the  well  known  and  important  case  of  Dalby  vs. 
India  and  London  Life  Insurance  Company,  and  the 
jurisprudence  on  this  subject  seems  to  be  now  settled 
in  England  to  the  effect  that  a  policy  of  life  insurance 
is  not  a  contract  of  indemnity,  and  that,  if  it  was  valid 
at  its  inception  the  transferee  needs  not  have  an  inter- 
est in  the  life  of  the  insured.  The  language  of  the 
Court  in  this  case  is  very  positive.  It  says  :  "  The 
contract  commonly  called  life  insurance,  when  prop- 
erly considered,  is  a  mere  contract  to  pay  a  certain 
sum  of  money  on  the  death  of  a  person  in  considera- 
tion of  the  due  payment  of  a  certain  annuity  for  his 
life,  the  amount  of  the  annuity  being  calculated  in  the 
first  instance  according  to  the  probable  duration  of  the 
life;  and  when  once  fixed  it  is  constant  and  invariable. 
The  stipulated  amount  of  annuit}^  is  to  be  uniformly 
paid  on  one  side,  and  the  sum  to  be  paid  in  the  event 
of  death  is  always,  except  when  bonuses  have  been 
given  by  prosperous  oflfices,  the  same  on  the  other. 
This  species  of  insurance  in  no  way  resembles  a  con- 
tract of  indemnity. '"*  * 

463.  The  jurisprudence  of  England  on  this  subject 
is  consequently  in  perfect  accordance  with  that  of 
New  York  and  the  other  States  whose  decisions  we 
have  cited  above.  Under  that  jurisprudence,  a  credi- 
tor who  insures  the  life  of  his  debtor,  paying  the  pre- 
mium  himself,  is  entitled  to  the  insurance  money  at 


"  Dalby  vs.  India  and   London  Life  Ins.  Co.,  28  Eng.  Law  and  Eq. 

312. 
See  Joyce  on  Insurance,  Vol.  1,  Sec.  26,  and  notes. 


408  The  Law  op  Pledge. 

the  death  of  the  insured,  even  if  the  debt  has  been 
paid  b}^  the  latter.  The  creditor,  in  such  a  case,  holds 
the  policy  '  of  insurance  as  an}'  chose  in  action  for 
which  he  has  given  value,  and  for  the  payment  of 
which  he  has  his  right  of  action  against  the  debtor  of 
the  chose  in  action. 

464.  The  same  principle  has  been  recognized  in 
France,  although  both  the  legislation  and  jurispru- 
dence of  that  country  are  3-et  meagre  on  the  subject  of 
life  insurance.  The  Court  of  Cassation  onl}-  some 
years  ago  decided  that  a  creditor  who  had  insured  for 
his  own  benefit  the  life  of  his  debtor,  with  the  latter's 
consent,  and  paid  the  premiums,  the  debtor  refusing 
to  pay  the  same,  was  entitled  to  the  insurance  mone}', 
although  the  debt  had  been  paid  by  the  debtor's  exec- 
utors after  his  death.  This  was  clearly  a  recognition 
of  the  doctrine  that  the  life  insurance  is  not  a  contract 
of  indemnity,  but  a  simple  contract  to  pay  money 
under  certain  conditions  and  for  a  legal  consideration. 
The  French  jurists  call  it  very  expressivel}'  "  a  com- 
mutative and  aleatory  contract  of  capitalization." 
There  is  still,  however,  a  strong  opposition  in  France 
to  this  theory  amons^  the  law  writers.* 


*  Court  of  Cassation,  1880.  p.  1121,  Che\alier  C.  Chayer. 
Fuzier-Herman.  Code  Civil.  Art.  2071,  Xos.  11,  12,  13. 


CHAPTER  XXXVIII. 

465.  Under  the  jurisprudence  of  the  Supreme 
Court  of  the  United  States  and  of  the  courts  of  the 
States  which  concord  with  it,  as  we  have  shown  in 
the  cases  cited,  the  creditor  having  only  an  insurable 
interest  in  the  life  of  his  debtor  to  the  extent  of  his 
debt,  is  only  entitled  to  the  insurance  mone}'  to  the 
same  extent ;  and  the  excess,  if  an}',  of  the  same 
insurance  should  be  paid  over  to  the  heirs  or  repre- 
sentatives of  the  insured.  And  such  is  the  rule  even 
when  the  creditor  has  paid  the  premiums.  In  such 
case  he  is  entitled  to  the  reimbursement  of  what  sums 
he  has  paid  to  the  insurer ;  but  the  final  balance  goes 
to  the  heirs  or  representatives  of  his  debtor 

It  is  what  was  decided  in  Cammack  vs.  Lewis, 
15  Wall.  643,  and  affirmed  in  Warnock  vs.  Davis, 
104  U.  S.  775,  the  court  holding  in  both  cases  that  the 
insurance  on  the  life  of  the  debtor,  so  far  as  the  cred- 
itor was  concerned,  for  the  excess  beyond  the  debt 
owing  to  him,  was  a  wagering  policy,  and  that  the 
creditor,  in  equity  and  good  conscience,  should  hold 
it  only  as  security  for  what  the  debtor  owed  him  when 
it  was  assigned,  and  for  such  advances  as  he  might 
have  afterward  made  on  account  of  it ;  and  that  the 
assignment  was  valid  only  to  that  extent. 

466.  The  court  might  have  given  another  reason 
for  its  ruling,  a  reason  to  be  found  in  the  law  of 
pledge,  as  valid  and  forcible  at  least  as  the  reason  said 

i09 


410  The  Law  of  Pledge. 

in  the  decisions  to  be  founded  on  equity  and  good  con- 
science. The  moment  the  pohcy  of  insurance  is 
assigned  to  the  creditor  as  security  of  the  debt,  the 
assignment  necessarily  covers  the  contract  of  pledge 
between  the  creditor  and  the  debtor.  In  the  nature 
of  things  it  can  not  be  anything  else  :  any  more  than 
when  other  choses  in  action  are  pledged,  or  when 
promissory  notes  or  bills  of  exchange  are  pledged. 
We  now  come  again  to  the  constant  distinction  which 
must  be  made  between  the  assig^nment  or  transfer 
of  such  things  for  the  purpose  of  security  only  and 
the  assig^nment  or  transfer  of  the  same  thingrs  for  the 
purpose  of  conveying  not  only  the  legal  title,  but  also 
the  ownership  of  them,  as  in  cases  of  sale,  or  ex- 
change, or  donation,  or  any  such  transactions  as  have 
not  for  their  object  the  securing  of  an  obligation.  In 
the  pledge  the  pledgeor  remains  the  real  owner  of  the 
thing  pledged ;  the  pledgee  is  onl}-  the  apparent 
owner.  When  the  debt  is  paid  the  pledgeor  is  entitled 
to  the  return  of  the  thing  pledged,  whether  the  pledge 
has  been  effected  b}'  actual  delivery  of  a  corporeal 
thing,  under  the  garb  of  a  sale,  or  by  means  of  an 
assignment.  When  a  promissory  note  is  pledged,  and 
the  pledgee  recovers  its  full  amount,  if  it  exceeds  that 
of  the  debt  clearly  the  pledgee  is  bound  to  turn  over 
the  excess  to  the  pledgeor.  Why  should  there  be  any 
difference  in  the  assignment  of  a  policy  of  life  insur- 
ance made  only  to  secure  a  debt? 

467.    Whether,  therefore,  life   insurance  is  or  is  not 
a  contract  of    indemnitv,  it  seems  evident   that,  when 


Pledge  of  Policies  of  Insurance.  411 

the  policy  is  the  property  of  a  debtor  who  assigns  it 
to  his  creditor  as  a  pledge,  the  latter,  after  receiving 
payment  from  either  the  debtor  or  his  heirs  or  repre- 
sentatives, is  bound  both  in  law  and  in  equity  to  re- 
assign the  policy  to  them. 

468.  But  when  it  is  the  creditor  himself  who  in- 
sures the  life  of  the  debtor  for  his  own  benefit,  and 
when  he  takes  the  policy  in  his  own  name,  payable 
to  himself,  pays  the  premium  and  does  not  charge 
them  to  the  debtor,  can  it  be  said  that  he  is  then  the 
owner  of  the  policy,  and,  in  that  case,  can  he  recover 
both  the  debt  from  the  debtor  and  the  insurance 
money  from  the  insurer?  It  was  so  decided  by  the 
Court  of  Cassation  in  France,  in  the  case  which  we 
have  cited  above.  The  decision  was  based  upon  the 
principle  that  the  transaction  was  exclusively  between 
the  creditor  and  the  insurance  company,  in  which  the 
debtor  had  no  interest,  and  in  which  the  creditor  had 
contracted  for  his  own  benefit,  the  contract  being  one 
simply  for  the  payment  of  money  and  not  one  of 
indemnity. 

469.  In  such  a  case,  however,  would  the  converse 
of  the  rule  be  equally  applicable,  and  if  the  creditor 
had  first  received  payment  of  the  policy  could  he  still 
demand  payment  of  the  debt  from  the  debtor  or  his 
representatives?  There  does  not  seem  to  be  any  good 
reason  why  he  should  not,  if  the  insurance  and  the 
debt  had  no  connection  together ;  but  the  subject  is 
still  an  imperfectly  explored  region  of  the  law  of  life 
insurance  as  applied  to  the  security  of  debts. 


CHAPTER   XXXIX. 

Pledge  of   Margins. 

470.  The  purchase  of  shares  of  capital  stock  is 
generally  done  through  a  stock  broker,  who  purchases 
in  his  own  name  and  carries  the  stock  for  account  of 
the  customer.  The  latter  deposits  a  sum  of  money, 
comparatively  small,  in  the  hands  of  the  broker,  as 
security  of  the  price  of  sale,  for  which  he  is  respon- 
sible. The  sum  deposited  is  called  a  margin.  The 
Common  law  jurisprudence  in  this  country  has  estab- 
lished the  principle,  that  the  contract  of  pledge  is 
formed  in  that  case,  tacitly  if  not  expressly,  between 
the  broker  and  the  customer,  the  former  being  the 
pledgee  and  the  latter  the  pledgeor  of  the  money 
deposited.  And  when,  in  the  purchase  of  the  stock, 
delivery  is  made  by  the  vendor  to  the  broker,  the 
pledge  extends  to  the  stock  delivered  as  well  as  to  the 
juoney  deposited.  The  contract  of  pledge  arises,  in 
such  cases,  by  implication  of  the  intention  of  the 
parties  and  of  the  consent  of  the  customer,  combined 
with  the  fact  that  the  money  and  the  stock  are  in  the 
possession  of  the  broker.  The  implication  of  the 
agreement  of  the  parties  results  from  the  usages  of 
the  place  where  the  transaction  takes  place.  The 
broker  is  presumed  to  rely  upon  the  tacit*  pledge  for 
his  security,  and  the  customer  is  presumed  to  grant 
the    security,  without    which   the    broker    would  not 

413 


il-l  The  Law  of  Pledge. 

buy  and  carry  the  stock  at  his  own  risk.  This  double 
presumption  is  based  upon  the  fact  that  such  is  the 
custom  in  transactions  of  that  kind  in  the  locahty 
where  the}^  take  place.  It  is  evident  that  if  there  is 
a  pledge  in  that  case,  and  none  by  express  agree- 
ment, it  must  be  implied  in  the  manner  that  we  indi- 
cate. The  contract  being  implied  from  the  custom, 
all  that  is  customary  under  similar  circumstances 
should  be  considered  as  entering  into  and  forming 
part  of  the  contract.  "^ 

471.  The  Court  of  New  York  has  been  prominent 
in  settling  the  principle  that  the  relation  of  pledgee 
and  pledgeor  is  tacitly  created  between  the  broker 
and  the  customer  when  the  former  purchases  stock 
and  carries  it  for  account  of  the  latter.  The  subject 
was  thoroughly  examined  and  expounded  in  the 
leading  case  of  Markham  vs.  Jandon,  where  the 
Court  said :    "  The  broker  undertakes  and  agrees  : 

' '  I .  At  once  to  buy  for  the  customer  the  stocks 
indicated. 

"2.  To  advance  all  the  money  required  for  the  pur- 
chase beyond  the  10  per  cent,  furnished  by  the  cus- 
tomer. 

"3.  To  carry  or  hold  such  stocks  for  the  benefit  of 
the  customer  so  long  as  the  margin  of  10  per  cent,  is 
kept  good,  or  until  notice  is  given  by  either  party  that 


*  Cook,  on  Stock,  Sec.  457  et  seq. 
Jones,  on  Pledge,  See.  495  et  seq. 
Colebrooke,  CoUat.  Securities,  pp.  527,  528. 
Dos  Passos,  Stock  Bi'okers,  112. 
Overton,  on  Liens.  205. 
Am.  and  Eng.  Ency.  of  I>aw,  Vol.  IS,  p.  707. 


Pledge  of  Margins.  415 

the  transaction  must  be  closed.  An  appreciation  in 
the  value  of  the  stocks  is  the  gain  of  the  customer, 
and  not  of  the  broker. 

"4.  At  all  times  to  have  in  his  name  or  under  his 
control,  ready  for  delivery,  the  shares  purchased,  or 
an  equal  amount  of  other  shares  of  the  same  stock. 

"5.  To  deliver  such  shares  to  the  customer  when 
required  by  him  upon  receipt  of  the  advances  and 
commissions  accruing  to  the  broker ;  or, 

"  6.  To  sell  such  shares   upon  the  order  of  the  cus- 
tomer,  upon    payment  of  the  like  sums  to  him,   and 
account  to  the  customer  for  the  proceeds  of  such  sale. 
*' Under  this  contract,  the  purchaser   undertakes — 
"i.  To  pay  a  margin  of  ten  percent,  on  the  current 
market  value  of  the  shares. 

"2.  To  keep  good  such  margin  according  to  the 
fluctuations  of  the  market. 

"3.  To  take  the  shares  so  purchased  on  his  order, 
whenever  required  by  the  broker,  and  to  pay  the 
difference  between  the  percentage  advanced  by  him 
and  the  amount  paid  therefor  by  the  broker. 

"  The  position  of  the  broker  is  twofold.  Upon 
the  order  of  the  customer,  he  purchases  the  shares  of 
stocks  desired  by  him.  This  is  a  clear  case  of  agency. 
To  complete  the  purchase  he  advances  from  his  own 
funds,  for  the  benefit  of  the  customer,  ninety  per 
cent  of  the  purchase  money.  Quite  as  clearly,  he 
does  not  in  this  act  as  an  agent,  but  assumes  a  new 
position.  He  also  holds,  or  carries  the  stocks  for  the 
benefit  of  the    purchaser,  until  a  sale  is  made  by  the 


416  The  Law  of  Pledge. 

order  of  the  purchaser,  or  upon  his  own  action.  In 
thus  holding  or  carrying,  he  stands  upon  a  different 
ground  from  that  of  a  broker  or  agent,  whose  office 
is  simpl}^  to  bu}^  and  sell.  To  advance  money  for  the 
purchase,  and  to  hold  and  carr}'  stocks,  is  not  the  act 
of  a  broker  as  such.  In  so  doing,  he  enters  upon  a 
new  dut}',  obtains  other  rights,  and  is  subject  to  addi- 
tional responsibilities. 

"•  The  plaintiff  insists  that  the  relations  between  the 
parties  is,  first,  that  of  principal  and  agent,  or  broker, 
when  the  shares  are  ordered  to  be  purchased  for  the 
account  of  the  customer,  and  were  so  purchased  ;  that 
in  advancing  the  money  to  complete  the  purchase,  the 
relation  of  debtor  and  creditor  is  created,  and  that 
thereupon  the  broker  becomes  a  pledgee  of  the  stock 
for  the  money  advanced  in  its  purchase. 

*'  The  defendants,  on  the  other  hand,  insist  that  the 
relation  of  the  parties  is  wholly  by  force  of  a  mutual 
and  dependent  contract ;  that  defendant's  agreement 
to  hold  or  carry  the  stock  was  dependent  on  the  plain- 
tiff to  furnish  them  with  the  means  to  do  so,  and  that 
when  the  plaintiff  failed  in  that  respect^  the  obligation 
to  hold  the  stock  ceased,  and  the  right  to  sell  it  was 
complete. 

"In  the  case  of  a  pledge  it  is  well  settled  that, 
upon  default  by  the  debtor,  the  property  in  the  sub- 
ject of  the  pledge  does  not  thereby  become  absolutely 
vested  in  the  creditor,  but  that  the  general  property 
still  remains  in  the  debtor.  To  cut  off  this  claim,  the 
creditor  may  resort  to  judicial  process,  or  he  may  sell 


Pledge  of  Margins.  417 

without  judicial  process,  upon  giving  notice  to  redeem 
and  giving  notice  of  the  time  and  phice  of  sale. 
(Wilson  vs.  Little,  2  Comst.  443  ;  2  Kent  Com.  581, 
582;  Story,  on  Bailments,  Sec.  287,  308,  310). 
Until  those  of  these  modes  is  resorted  to  the  right  to 
redeem  remains.  (A/.) 

"  If  the  theory  of  the  defendants  is  correct,  the 
plaintiff  being  himself  in  default  in  the  performance 
of  the  contract  on  his  part,  can  maintain  no  action  ; 
and  if  the  defendants  jrave  notice  to  file  the  marsfin, 
they  had  the  right  on  failure  so  to  file  to  sell  without 
further  notice. 

"A  pledge  is  a  delivery  of  goods  by  a  debtor  to  his 
creditor  to  be  kept  till  the  debt  is  discharged  ;  or, 
again,  it  is  a  bailment  of  personal  property  as  secur- 
ity for  some  debt  or  engagement  (2  Kent,  577  ;  Story, 
on  Bail.,  Sec.  286).  Ordinarily,  all  goods  and  chat- 
tels may  be  the  subject  of  a  pledge,  including  money, 
debts,  negotiable  instruments  and  choses  in  action 
(Story,  Sec.  289) .  While  the  terms  of  a  pledge  require 
that  there  should  be  a  delivery  of  the  article,  it  is  not 
necessary  that  there  be  an  actual  manual  delivery.  It 
is  sufficient  if  there  be  any  of  those  circumstances 
which,  in  construction  of  law,  are  deemed  sufficient 
to  pass  the  possession  of  the  property.  Thus,  goods 
at  sea  ma}^  be  passed  in  pledge  by  a  transfer  of  muni- 
ments of  title,  or  goods  in  a  warehouse  b}'  the  deliv- 
ery of  the  key.  ^  So  if  the  pledgee  has  the  thing 
already  in  possession,  as  by  a  deposit  or  loan,  the 
very  contract  transfers  to  him,  bv  operation  of  law,  a 


418  The  Law  op  Pledge. 

virtual  possession  tliereof,  as  a  pledge,  the  moment 
the  contract  is  conipletecr  (Stor\-,  Bail.,  297,  and 
Auth.,  supra).  Possession  may  also  be  temporarily 
parted  with,  as  between  pledger  and  pledgee,  with- 
out destroying  this  relation,  as  where  so  delivered  for 
and  with  an  agreement  for  redelivering ;  or  where  it 
is  delivered  to  the  owner  as  special  bailee  or  agent 
(/<r/.,  Sec.  299  . 

"  While  it  is  true  that  the  dealer,  in  the  present 
case,  never  had  actual  possession  of  the  propert}'', 
which  he  claims  to  have  pledged,  he  had  it  sufficiently 
to  bring  his  case  within  the  principles  of  the  law  of 
pledge.  The  substance  of  the  first  branch  of  the 
transaction  is  this :  The  plaintiff  calls  upon  the 
defendants,  who  are  brokers,  to  purchase  for  him 
certain  shares  of  railroad  stock,  and  furnishes  him 
with  $1000  for  that  purpose,  agreeing  to  pay  interest 
on  advances  he  shall  make  in  the  purchase,  and  com- 
missions. The  defendants  make  the  purchase^  having 
themselves  advanced  ninety  per  cent,  of  the  purchase 
mone}-.  They  bring  to  the  plaintiff  the  certificates  of 
the  stock  thus  purchased  by  him  and  for  him,  and 
deliver  them  to  him  as  the  owner  thereof.  He  there- 
upon hands  them  back  to  the  defendants,  to  hold  as 
securit}^  for  their  advance  on  the  purchase,  with  inter- 
est and  commissions.  If  these  precise  forms  had  been 
observed,  no  one  would  deny  that  the  delivery  of  the 
certificates  would  have  constituted  a  strict,  formal 
pledge.  In  my  opinion,  the  transaction  as  it  took 
place  amounted  to  the  same    thing.     To  have    deliv- 


Pledge  of  Margins.  419 

ered  the  certificates  to  the  plaintiff,  and  that  the  plain- 
tiff should  then  have  returned  them  to  the  defendants, 
to  be  held  by  them  as  security  for  the  advance,  in 
their  purchase,  would  leave  the  parties  in  precisely 
the  same  situation  as  if  the  defendants  had  retained 
them  for  that  purpose  ;  the  form  of  a  delivery  to  the 
plaintiff,  and  a  redelivery  by  him  to  the  defendants, 
being  waived  by  agreement  of  the  parties.  It  comes 
fully  within  the  principle  I  have  already  quoted  from 
wStory  on  Bailments,  that  where  the  pledgee  has  the 
thing  in  his  possession,  the  contract  of  pledge  operates 
as  a  delivery,  the  moment  the  interest  is  completed 
(Story,  Bailments,  Sec.  297).  Thecertificatesare appro- 
priated as  security  for  an  engagement,  to  wit :  the  pay- 
mentof  the  advance, withinterestandcommissions.  The 
possession  and  the  delivery  are  complete  in  the  abbre- 
viated manner  I  have  described.  The  riirht  of  re- 
demption,  in  other  words,  the  ultimate  ownership  of 
the  property  in  the  plaintiff  was  clearly  provided  for 
and  was  the  prominent  idea  in  his  mind.  There  is 
no  evidence  here  that  the  plaintiff  necessarily  intended 
a  sale  of  the  stock  purchased.  He  bought  it  for  the 
purpose  of  making  money.  If  he  could  make  more 
money  by  holding  it  permanently  than  by  selling,  no 
doubt  he  would  continue  to  hold.  But  I  do  not  find 
that  the  intention  to  have  or  to  suffer  a  sale,  or  the 
reverse,  forms  an  element  in  the  definition  of  a  pledge. 
Nor  do  I  see  how  the  fluctuating  value  of  the  property 
can  be  invoked  to  determine  the  character  of  the  trans- 
action.    It  can   not  be   doubted,  upon  the   authorities 


420  The  Law  of  Pledge. 

cited,  that  shares  of  stock  in  an  incorporated  company, 
however  unsubstantiated  may  be  its  character,  or 
however  fluctuating  their  value,  may  form  the  sub- 
ject of  a  pledge  equally  with  a  cargo  of  wheat,  a  ves- 
sel, or  any  other  specific  article.  In  my  judgment, 
the  contract  between  the  parties  was,  in  spirit  and  in 
effect,  if  not  technically  and  in  form,  a  contract  of 
pledge.  To  authorize  the  defendants  to  sell  the  stock 
purchased,  they  were  bound  first  to  call  upon  the  plain- 
tiff to  make  good  his  margin  ;  and  failing  in  that,  he  was 
entitled,  secondl}',  to  notice  of  the  time  and  place  where 
the  stock  would  be  sold  ;  which  time  and  place,  thirdly, 
must  be  reasonable.   (See  Auth.  supra.y  * 

472.  We  have  quoted  so  extensively  from  the  deci- 
sion because  it  is,  in  realit}',  the  foundation  of  the 
jurisprudence  which  establishes  that  there  is  a  tacit 
pledge  between  the  customer  and  the  broker  who 
purchases  and  carries  the  stock.  But  this  doctrine 
was  not  adopted  with  unanimity  even  by  the  Court 
of  New  York,  and  its  dissenting  judges  combated  it 
with  forcible  reasons,  contending  that  the  contract  of 
pledge  does  not  arise  impliedly  in  such  cases,  but  that 
the  transaction  between  the  broker  and  the  customer 
is  simply  one  of  agency  and  remains  such  to  the  end. 

It  must  also  be  observed  that  the  Court  refused  to 
hear  evidence  of  the  custom  of  the  stock  brokers  in 
similar  transactions.  It  would  seem  that  if  the  pledge 
only  arose  by  tacit  understanding  of  the  parties  from 
the    usages    of    the  place,   the  proof  of    such    usages 

*  Markhani  vs.  .Taudon,  41  N.  Y.  239. 


Pleixje  of  Margins.  421 

should  have  been  received  to  show  what  the  tacit 
understanding  was.  Even  if  the  rules  of  the  brokers 
were  contrary  to  the  Common  law  principles  of  the 
pledge,  unless  those  rules  were  unlawful,  they  ought 
to  have  governed  the  transaction,  which  was  pre- 
sumed to  have  been  formed  under  them. 

It  is  substantially  what  one  of  the  judges  said  in 
his  dissenting  opinion.  He  stated  that  the  mutual 
understanding  and  intent  of  the  contracting  parties 
not  being  expressed  in  the  agreement  as  to  the  rights 
of  the  broker  to  sell  the  stock  under  the  circumstances 
of  the  case,  they  should  have  been  gathered  from  the 
usages  and  customs  well  known  and  established  in 
the  business.  There  is  some  difficulty  in  the  inter- 
pretation and  legal  effect  of  an  agreement  to  buy  stock 
on  a  margin  in  the  usual  wa}',  and  to  carry  the  same 
on  such  marsjin.  Usage  and  custom  are  not  admis- 
sible  to  control  the  settled  legal  force  and  effect  of  a 
contract  that  is  not  ambiguous  or  couched  in  terms 
of  technical,  doubtful  or  unsettled  meaning.  But 
usage  and  custom  give  meaning  to  terms  that  to  one 
who  is  ignorant  of  the  usage  are  wholly  novel  or  even 
unintelligible.  In  such  case  evidence  of  usage  and 
custom  is  received,  not  for  the  purpose  of  varying 
and  altering  a  contract,  as  overriding  rules  of  law 
prescribing  its  effect,  but  for  the  purpose  of  ascertain- 
ing and  settling  what  the  contract  was  ;  what,  in  point 
of  fact,  was  the  mutual  understanding  and  intent  of 
the  parties.*      It  is  difficult  indeed  to  understand  how 

*  Markham  vs.  Jaudon,  41  N.  Y.  254. 


422  The  Law  of  Pledge. 

the  Court  could  find  that  the  relation  of  pledgeor  and 
pledgee  arises  impliedly  from  a  transaction  which  is 
governed  by  custom,  without  holding  that  the  custom 
itself  enters  into  and  forms  part  of  the  agreement,  and 
therefore  should  be  proved  if  necessary'  to  show  the 
meaning  of  the  contract  and  the  intention  of  the 
parties. 


CHAPTER    XL. 

473.  This  theory  of  the  admissibiHty  of  the  proof  of 
usage  for  the  purpose  of  ascertaining  the  intention  of 
tlie  contracting  parties  under  certain  circumstances, 
was  acknowledged  and  apphed  by  the  Court  of  Con- 
necticut in  a  case  in  which  it  agreed  with  the  Court 
of  New  York  as  to  the  principle  that  the  relation  of 
pledgeor  and  pledgee  springs  from  the  agreement  of 
the  broker  to  purchase  and  carry  stock  for  his  cus- 
tomer. The  question  in  Connecticut  was  not,  as  in 
New  York,  whether  the  usage  could  be  proved  under 
which  a  broker  sells  the  stock  if  the  margin  is  not 
made  good,  without  an  express  authority  from  the 
customer  to  sell  in  such  case.  The  question  was 
whether  the  usage  could  be  proved  under  which  the 
broker,  as  pledgee,  can  repledge,  against  the  rule  of 
the  Common  law,  without  express  authority  from  the 
customer.  The  principle  is  clearl}'  the  same  in  both 
cases.  In  both  the  question  is  whether,  by  a  tacit 
ngreement,  the  usage  becomes  part  of  the  contract. 

474.  The  Court  of  Connecticut  said:  "  The  right 
to  repledge  for  his  own  debt  is  clearl}?^  one  not  en- 
joyed by  a  Common  law  pledgee.  Bunnell  &  Scran- 
ton  undoubtedly  exercised  it  over  the  stocks  and 
securities  in  their  hands  for  the  purpose  of  obtaining 
the  capital  requisite  to  carry  their  customers'  pur- 
chases. They  even  went  so  far  as  to  pledge  the 
stocks    and  securities   of   one  customer   en   bloc  with 

42S 


424  The  Law  of  Pledge. 

those  of  other  customers.  This  course  of  deahng^ 
however,  was  in  conformity  with  the  estabHshed  cus- 
tom and  usage  in  the  stock  market  in  Connecticut 
and  New  York.  When  the  plaintiffs  gave  their 
orders  to  Bunnell  &  Scranton  they  understood  that 
the  orders  were  for  execution  in  the  New  York  Stock 
Exchange.  They  knew  the  relation  of  Bunnell  & 
Scranton  to  this  exchange  and  their  mode  of  trans- 
acting- business  therein  throuijh  New  York  houses, 
members  thereof.  The}'  must,  therefore,  be  held  to 
have  contemplated  and  authorized  a  course  of  deal- 
ino;  in  accordance  with  the  rules  and  customs  of  that 
market.  The  authorities  are  not  uniform  as  to  the 
effect  of  trade  usages  upon  the  contractual  obligations 
of  parties.  We  think,  however,  that  the  better  author- 
ity goes  to  this  extent,  at  least,  that  when  one  em- 
ploys another  to  deal  in  a  particular  market,  he  will 
be  held  as  intending  that  the  mode  of  performance 
should  be  in  accordance  with  the  established  customs 
and  usages  of  that  market,  as  long  as  the  custom  or 
usage  is  neither  immoral,  unlawful,  unreasonable, 
contrary  to  the  express  agreement  of  the  parties,  nor 
such  as  to  chancre  the  intrinsic  character  of  the  under- 
taking.  Robinson  vs.  Mollett,  L.  R.^  7  PI.  L.,  802  ; 
Naurse  vs.  Prime,  4  Johns.  Ch.  490;  Lawrence  vs. 
Maxwell,  58  N.  Y.  19;  Samuels  vs.  Oliver,  130 
111.   73. 

"  In  view  of  the  character  and  necessities  of  the 
business  undertaken  by  brokers  in  carr^'ing  for  their 
customers  stocks  bought  upon  a  margin,  and  for  the 


Pledge  of  Margins.  425 

purposes  which  the  custom  of  repledging  was  intended 
to  serve,  we  are  not  prepared  to  say  that  it  is  open  to 
any  of  the  enumerated  objections.  Courts  have  com- 
monly sanctioned  it.  Nourse  vs.  Prime,  4  Johns. 
Ch.  490;  Lawrence  vs.  Maxwell,  53  N.  Y.  19;  Ore- 
gon Company  vs.  Hillmers,  20  Fed.  Rep.  717  ;  Dos 
Passos,  on  Stock  Brokers,  357  ;  18  Am.  and  Eng. 
Ency.  of  Law.  707. 

"  This  custom  therefore  became  part  of  the  contract 
between  Bunnell  &  Scranton  and  their  customers. 
The  contract  thus  gave  to  Bunnell  &  Scranton  the 
implied  authority  to  repledge.  Such  authority  it  has 
long  been  recognized  could  be  given  by  a  pledgeor. 
Ogden  vs.  Lathrop,  65  N.  Y.  158;  Price  vs.  Gover, 
40  Md.  102  ;  Dos  Passos,  on  Stock  Brokers,  662  ; 
Story,  on  Agency,  Sec.  118."* 

475.  The  authority  of  the  case  of  Markham  vs. 
Jaudon  has  been  repeatedly  followed  in  the  State  of 
New  York  in  subsequent  adjudications  and  may  be 
considered  as  firmly  established.  But  as  late  as  the 
year  1876,  in  the  case  of  Baker  vs.  Drake  et  al.,  the 
Court  was  still  divided  both  on  the  question  of  the 
pledge,  as  arising  impliedly  between  the  broker  and 
the  customer,  and  on  the  question  of  the  admissibility 
of  evidence  to  show  the  usages  of  stock  brokers  who 
purchase  on  a  margin  and  carry  the  stock. f  In 
the  case  of  Gillet  et  al,  vs.  Whiting,  however,  decided 
in  1890,  the  Court  was  unanimous  in  holding  that  the 


*  Skiff  vs.  Stoddard,  03  Conn.  218,  219. 
t  Baker  vs.  Drake  ct  a?.,  CO  N.  Y.  518. 


42G  The  Law  of  Pledge. 

relation  existing  between  the  customer  and  the  broker 
who  buys  and  carries  the  stock,  is  that  of  pledgeor 
and  pledgee  ;  but  the  question  of  admissibility  of  evi- 
dence of  the  customs  of  stock  brokers  was  not  raised. 
The  main  point  in  the  case  was  as  to  the  qiiaiiimn  of 
damages  that  the  pledgeors  were  entitled  to  \)\  reason 
of  the  conversion  of  the  pledges.* 

476,  The  Court  of  Connecticut  has  in  the  same 
case  of  Skiff  vs.  Stoddard  adopted  the  doctrine  of  the 
tacit  formation  of  the  contract  of  pledge  between  a 
broker  and  his  customer,  and  carried  it  even  farther 
than  the  previous  decisions. 

The  Court  cited  Markham  vs.  Jaudon  as  the  lead- 
ing case  in  New  York  on  that  subject  and  quoted 
chietlv  from  it  in  declaring  that  the  relation  of 
pledgeor  and  pledgee  springs  from  the  transaction 
between  the  customer  and  the  broker,  in  which  the 
latter  purchases  and  carries  stock.  In  the  Connecti- 
cut case,  the  defendant  contended  for  the  contraiy 
principle.  The  Court  said  in  that  respect:  ''If  we 
look  for  judicial  sanction  for  the  proposition  of  the 
defendant  we  find  none  outside  of  the  Supreme  Court 
of  Massachusetts,  and  no  present  authority  there  for 
the  precise  interpretation  here  contended  for.  In 
Hayes  vso  Wood,  15  Gray.  375,  which  was  decided 
in  i860,  before  the  stock  broker  was  as  familiar  a 
figure  as  he  is  to-day  and  before  the  law  govern- 
ing his  calling  was  as  well  established,  that  court 
devoted  a   few  lines    only  to    this   subject,   but    gave 

*  Gillet  et  al.  vs.  Whiting,  120  X.  Y.  402. 


Pledge  of  Margins.  427 

countenance  to  the  defendanTs  claim  in  that  it 
said  of  a  margin-purchasing  contract  that  it  was 
strictly  a  conditional  one,  to  deliver  so  many  shares 
upon  the  payment  of  so  much  money,  and  that  until 
the  money  was  paid  the  right  to  have  performance 
did  not  accrue. 

'•Ill  the  latter  case  of  Covell  vs.  Loud,  135  Mass. 
41,  the  Court  made  it  clear  that  it  did  not  regard  the 
statement  of  the  contract  in  Hayes  vs.  Wood  exhaust- 
ive, but  simply  expressive  of  its  distinct  feature.  It 
apparently  did  not  intend  to  adopt  a  new  position  as 
respects  what  was  the  distinctive  feature  of  the  con- 
tract, since  it  cited  approvingly  the  language  of  the 
former  case ;  but  it  did,  in  plain  terms,  state  that 
there  was  incorporated  into  the  contract  an  agreement 
on  the  part  of  the  broker  "'to  purchase  and  hold  or 
carrv "  for  the  customer.  In  neither  of  these  cases 
is  the  matter  under  consideration  treated  at  any 
length,  and  it  is  not  altogether  easy  to  gather  from 
them  just  what  the  Court's  construction  of  the  under- 
taking of  the  parties  in  its  full  scope  was.  If  we 
interpret  their  language  aright,  their  doctrine  is,  sub- 
stantially, that  the  broker  in  margin-purchasing  con- 
tracts like  those  under  consideration  agrees,  in  con- 
sideration of  the  customer's  payments,  to  purchase 
certain  stocks  or  securities  and  hold  or  carry  them,  or 
an  equal  number  of  like  shares  or  securities^  ready  to 
be  delivered  to  the  customer  when  required  by  him, 
and  upon  demand  and  payment  therefor  to  deliver 
the  same  to  him. 


428  The  Law  of  Pledge. 

"  Tills  enlarged  construction  oi  the  contract,  in  so 
tar  as  it  brings  within  its  scope  what  by  established 
usage  is  done  in  its  execution,  obviates  to  that  extent, 
of  course,  the  inconsistencies  which  we  have  coin- 
mented  upon  as  existing  between  the  obligation  and 
performance.  Doubtless  the  construction  might  be 
so  far  elaborated  as  to  embrace  within  the  terms  of 
the  contract  all  the  features  which  characterize  the 
course  of  dealing  under  it.  The  result,  however, 
would  not  then  be  to  remove  the  difficulties  attendinor 
the  situation.  The  inconsistencies  and  incongruities^  to 
be  sure,  would  no  longer  arise  from  without,  but  they 
would  still  continue  to  exist  within  the  contract  and 
be  as  inexplicable  as  ever.  The  contract  would  become 
one  inharmonious  and  inconsistent  in  its  parts.  So 
long  as  the  interpretation  of  the  contract  preserves  as 
its  distinctive  feature  the  principal  proposition  that  the 
customer  purchases  merely  the  right  to  have  delivery 
to  him  in  the  future,  at  his  option,  of  stocks  or  securi- 
ties at  the  price  of  the  day  of  agreement,  and  its  cor- 
ollary that  the  customer  derives  no  right,  title  or 
interest  in  the  stocks  or  securities  until  final  perform- 
ance, the  difficulties  in  the  way  of  harmonizing  the 
situation  are  bound  to  exist.  The  fundamental  diffi- 
culty grows  out  of  necessary  attempt  in  some  way  to 
transform  the  customer,  who  enjoys  all  the  incidents 
and  assumes  all  the  risks  of  ownership,  into  a  person 
who  in  fact  has  no  right,  title  or  interest,  and  to 
create  out  of  the  broker,  who  enjoys  none  of  the  inci- 
dents of  ownership   and  assumes  not  a  particle  of   its 


Pledge  of  Margins.  429 

responsibility,  a  person  clpthed  with  a  full  title  and  an 
absolute  ownership."'^  But  the  court  was  not  unani- 
mous in  this  decision,  an'd-  a  ver}-  strong  dissenting 
opinion  was  presented  by  one  of  the  judges,  contend- 
ing that  the  contract  of  pledge  does  not  arise  im- 
pliedly between  the  broker  and  the  customer  when  the 
former  purchases  stock  and  carries  it  for  the  latter  on  a 
marijin. 

477.  We  said  that  the  court  of  Connecticut  had 
gone  even  farther  than  that  hi  New  York  in  the  doc- 
trine  that  the  relation  of  pledgeor  and  pledgee  arises 
impliedly  between  the  customer  and  the  broker  who 
purchases  and  carries.  In  the  same  case  of  Skiff  vs. 
Stoddard  it  was  held  that  the  pledge  exists  in  such 
circumstances  whether  the  broker  holds  for  account  of 
his  customer  the  identical  and  specific  stock  which  he 
purchased  for  him,  or  whether  he  disposes  of  it  in  the 
course  of  his  business  and  replaces  it  by  other  stock  of 
the  same  kind.  And  by  the  same  principle  the  court 
decided  that  the  fact  that  the  identical  shares  origi- 
nallv  bought  for  each  customer  were  not  kept  separ- 
ate and  apart  from  other  like  shares  by  the  broker  did 
not  destroy  the  pledge 

This  doctrine  is  based  upon  the  theory  that  shares 
of  stock  have  no  individualit}-,  no  earmarks ;  that 
they  only  represent  undivided  proportionate  interests 
in  the  ownership  of  the  corporation  ;  and  that  they 
are,  therefore,  of  unnecessary  or  impossible  identifi- 
cation.f 

*  Hfaeriff  vs.  Stoddard.  OH  Ct.  214,  215,  21(5. 
t  tikiff  vs.  btoddard,  03  Ct.  218. 


430  The  Law  of  Pledge. 

478.  The  theory  is  supported  by  high  authority, 
both  from  the  courts  and  the  law  writers  of  this 
country.  But  it  seems  doubtful  that  it  is  fully  estab- 
lished and  consecrated  by  the  jurisprudence  of  the 
Common  law.  It  is  on  its  face  contrary  to  the  funda- 
mental principles  of  the  contract  and  the  law  of 
pledge,  which  prescribe  that  only  a  specific  thing, 
susceptible  of  delivery  and  specification,  can  be  the 
subject  of  a  pledge,  and  that  the  pledgee  loses  all  his 
rights  as  such  the  moment  he  abandons  the  possession 
of  the  thing  pledged.  Under  the  rules  of  the  Civil 
law,  by  which  the  nature  of  the  pledge  is  better 
understood,  better  defined  and  better  established,  it 
could  not  be  held  for  a  moment  that  the  pledgee  of 
stock  who  disposes  of  it  and  replaces  it  by  other 
stock  of  the  same  kind  still  remains  a  pledgee  of  the 
substituted  stock. 

478.  We  have  so  far  only  considered  the  question 
of  the  broker's  pledge  when  it  is  stocks  that  he  pur- 
chases and  carries  on  a  margin  for  his  customer,  and 
when  the  stock  is  actually  delivered  by  the  seller.  In 
such  cases,  under  the  authority  of  the  decisions  of  the 
courts  of  New  York  and  Connecticut,  both  the  money 
deposited  as  a  margin  by  the  customer  and  the  stock 
are  pledged  by  implication  to  the  broker.  The  pledge 
extends  to  the  stock  because  it  is  delivered  to  the 
broker  and,  therefore,  in  his  possession.  But,  in  the 
transactions  known  as  the  purchases  of  futures^  it  is 
clear  that   there  can  be  no  pledge  of  the  stock,  inas- 


Pledge  op  Margins.  431 

much  as  it  is  not  delivered  ;  or  rather,  the  pledge  only 
arises  when  deUvery  is  made  by  the  seller  at  the  stipu- 
lated time. 

The  rule  is  evidently  the  same  in  the  cases  of  pur- 
chase of  produce  and  other  articles  of  merchandise 
as  in  the  purchase  of  stocks.  There  can  be  no  pledge 
of  the  same  if  there  is  no  delivery  to  the  broker. 
This  was  decided  by  the  Court  of  Illinois  in  a  case  of 
the  purchase  of  grain  for  future  delivery.* 

479.  In  closing  this  subject  it  may  be  proper  to  say, 
however  clear  it  is  that  the  broker  holds  as  a  pledge 
the  margin  deposited  in  his  hands  by  the  customer 
for  the  purpose  of  securing  him,  that  the  question 
whether  the  stocks  or  merchandise,  even  when  deliv- 
ered, are  also  pledged  to  him  by  implication,  is  not 
solved  with  sufficient  certainty  to  be  considered  as  a 
settled  point  of  American  jurisprudence.  There  is 
no  unanimity  in  the  decisions  of  the  courts  of  the 
two  States  which  have  passed  upon  it.  The  court  of 
Massachusetts  is  clearly  opposed  to  it.  The  Supreme 
Court  of  the  United  States  has  not  yet  been  called  upon 
to  decide  it,  nor  have  the  various  courts  of  the  other 
States  of  the  Union. 


*  Corbet  vs.  Underwood,  83  111.  324. 


CHAPTER  XLI. 

Pi.EDGE   BY  Factor. 

480.  It  is  well  known  that  at  Common  law  a  factor 
can  not  pledge  the  property  of  the  consignor  without 
his  consent.  The  reason  of  this  is  obvious. 
If  he  pledges  it  for  his  own  debt,  he  commits 
a  breach  of  trust.  If  he  pledges  it  for  the  debt  of 
the  consignor,  he  does  an  unwarranted  act  by  ex- 
ceeding his  authority.  The  property  is  consigned 
to  the  factor,  or  placed  in  his  hands,  to  be  sold  for 
account  of  the  owner.  Any  other  disposition  than  the 
sale  of  it  is  in  violation  of  the  factor's  mandate.  The 
owner  wants  his  property  sold  for  purposes  of  his 
own,  and  does  not  want  it  pledged.  This  is  what 
was  said  in  a  still  recent  case  decided  by  the  House  of 
Lords  and  quoted  by  the  Supreme  Court  of  the  United 
States,  in  Allen  vs.  St,  Louis  Bank,  130  U.  8.  32. 

Lord  Chancellor  Selborne  said  in  the  case  alluded 
to  :  "  It  is  manifest  that  when  a  man  is  dealinof  with 
other  people's  goods,  the  difference  between  an  au- 
thority to  sell  and  an  authority  to  mortgage  or 
pledge  is  one  which  may  go  to  the  root  of  all  the 
motives  and  purposes  of  the  transaction.  The  object 
of  a  person  who  has  goods  to  sell  is  to  turn  them  into 
money ;  but  when  the  goods  are  deposited  b}'  way  of 
security  for  money  borrowed,  it  is  a  transaction  of  a 
totally  different  character.      If  the  owner  of  the  goods 


434  The  Law  of  Pledge. 

does  not  get  the  mone}-,  his  object  and  purpose  are 
simply  defeated ;  and  if,  on  the  other  hand,  he  does 
get  the  money,  a  different  object  and  different  pur- 
pose are  substituted  for  the  first,  namel}',  that  of  bor- 
rowing money  and  contracting  the  relation  of  debtor 
with  a  creditor  while  retaining  a  redeemable  title  to 
the  goods,  instead  of  exchanging  the  title  to  the  goods 
for  a  title  unaccompanied  by  any  indebtedness,  to 
their  full  equivalent  in  money."  City  Bank  vs.  Bar- 
row, 5  App.  Cas.  664,  670. 

In  that  case  the  English  court  said  : 

"When  there  is  a  power  by  law  to  sell,  a  purchaser 
may  obtain  from  the  vendor,  even  as  against  the  true 
owner,  a  good  title,  but  that  can  not  extend  b}-  impli- 
cation to  a  pledge. 

"Barrow  was  a  leather  merchant  in  London.  Bon- 
nell  was  a  tanner  in  Canada.  Barrow  agreed  to  pay 
Bonnell  i)^d.  per  pound  for  every  hide  tanned  by 
Bonnell  in  the  mode  of  the  country,  and  Bonnell  was 
to  procure  freight  and  send  back  the  hides.  ]]arrow 
sent  out  a  large  number  of  the  hides ;  they  were 
tanned  and  freight  was  procured  for  them,  but  in  the 
meantime  Bonnell  had  obtained  from  the  Toronto 
Bank  advances  on  his  own  account  on  bills  and  hy- 
pothecated the  hides  to  the  bankers  as  security  for 
such  advances,  engaging  to  hand  over  to  them  the  bills 
of  lading  if  his  bills  of  exchange  were  not  duly  hon- 
ored. They  were  not  duly  honored,  and  the  bankers 
(who  had  acted  in  entire  ignorance  of  the  transac- 
tions between  Barrow  and   Bonnell)  claimed  to  retain 


Pledge  by  Factor.  435 

the  bills  of    lading  and  the  hides  until  their  demands 
were  satisfied." 

It  was  held  that  under  the  circumstances  of  the  case 
Bonnell  could  not,  under  an}-  law,  English  or  Cana- 
dian, claim  to  be  a  factor  or  agent  of  Barrow,  entitled 
to  pledge  Barrow's  goods,  and  that  consequently  the 
bankers  could  not  set  up  an}-  title  to  the  goods  as  de- 
rived from  him  against  the  real  owner.* 

481.  It  is  evident  that  we  fall  here  under  the  gen- 
eral principles  of  the  law  of  mandate  or  agency.  The 
factor  is  a  mere  agent,  with  a  limited  and  specified 
authority.  His  acts  beyond  that  authorit}'  are  illegal, 
as  all  unauthorized  acts  of  an  agent.  AVhen  and 
where  the  Common  law  is  changed  by  statute,  and 
the  factor  is  permitted  to  pledge  the  property  of 
the  consignor  or  owner,  then  and  there  the  con- 
tract of  mandate  between  the  factor  and  the  principal 
is  entered  into  by  them  with  the  understanding  that 
the  statute  will  govern  their  relations,  and  the  factor 
will  have  the  power  to  pledge  as  well  as  to  sell. 
The  law,  then,  is  read  into  their  agreement.  It  is, 
therefore,  still  by  the  consent  and  authority  of  the 
owner  of  the  goods  that  the  factor  may  pledge  them. 
But  a  usage  of  trade  for  banks  to  take  from  factors, 
as  security  of  loans  or  other    indebtedness,  pledges  of 

*  Gill  vs.  Kymer,  5  Moore,  503. 
Fielding  vs.  Kymer,  2  B.  &  B.  639. 
Newsom  vs.  Thornton,  6  East.  17,  2  Smith,  207. 
Guichard  vs.  Morgan,  4  Moore,  3(5. 
Martini  vs.  Coles,  1  M.  &  S.  140. 
Delauney  vs.  Barker,  2  Stark,  539. 
Boyson  vs.  Coles,  6  M.  &  S.  14. 
Daubigny  vs.  Duval,  5  T.  R.  604. 
McCombie  vs.  Davies,  7  East.  5,  3  Smith,  3. 


436  The  Law  of  Pledge. 

goods  known  to  be  held  by  them  as  factors  is  unlaw- 
ful and  does  not  protect  the  pledgees  against  the  true 
owner.''' 

482.  The  Common  law  was  changed  in  that  respect 
by  statute  in  England  in  the  earl}-  part  of  this  cen- 
tury. The  necessity  of  permitting  factors  in  certain 
cases  to  pledge  the  goods  in  their  possession,  for  the 
improvement  of  commerce,  b^'  affording  security 
to  persons  dealing  with  them,  was  felt  and  provided 
for  as  early  as  at  that  time  bv  acts  of  Parliament 
known  as  the  Factors'  Act,  namely  :  the  4  Geo.  4, 
C.  S3  ;   6  Geo.  4,  C.  94,  and  5  and  6  Vict.,  C.  39. 

The  first  section  of  the  last  mentioned  act,  which  is 
still  in  force,  provides  in  substance  that  any  agent 
with  the  possession  of  goods,  or  of  the  documents  of 
title  to  goods,  shall  be  deemed  and  taken  to  be  the 
owner  of  such  goods  and  documents,  so  far  as  to  give 
validity  to  any  contract  or  agreement  by  way  of 
pledge,  lien  or  securit}',  do/m  /ide  ma.de  by  any  person 
with  such  agent  so  entrusted  as  aforesaid,  as  well  as  for 
an}'  original  loan,  advance  or  pavment  made  upon 
the  security  of  such  goods  or  documents,  as  also  for 
any  further  or  continuing  advance  in  respect  thereof, 
and  that  such  contract  or  agreement  shall  be  binding 
upon  and  good  against  the  owner  of  such  goods,  and 
all  persons  interested  therein,  not-withstanding  the  per- 
son claiming  such  -pledge  or  lien  may  have  had  notice 
that  the  persoti  ivith  ivhom  such  contract  or  agree?nent 
is  7nade  is  only  an  age?it. 

*  Allen  vs.  St.  Louis  Bank,  120  U.  S.  20. 


Pledge  by  Factor.  437 

483.  The  act  provides  further  that  such  pledge  by 
the  factor  is  only  valid  if  the  pledgee  had  no  notice 
that  the  factor  was  not  authorized  by  his  principal  to 
pledge  the  goods ;  or  that  the  factor  was  acting  in 
bad  faith ;  or  that  the  debt  secured  by  the  pledge 
was  an  antecedent  obligation  of  the  factor  to  the 
pledgee.  Consequently,  the  pledge  by  a  factor  to  a 
pledgee  in  good  faith,  who  knows  that  he  is  dealing 
with  a  factor,  is  valid,  in  England,  even  against  the 
owner  of  the  goods,  who  has  not  authorized  the 
pledge  of  them  if  the  pledgee  is  not  aware  of  the 
want  of  authority  in  the  factor.'^ 

It  has  been  held,  under  the  provisions  of  that 
statute,  by  the  highest  authorities,  that  knowledge 
that  the  agent  making  the  pledge  is  a  factor,  without 
further  notice  that  he  is  acting  mala  fide  and  beyond 
his  authority,  does  not  deprive  the  pledgee  of  the 
protection  of  the  statute. f 

484.  The  State  of  New  York  soon  followed  the 
example  of  England  in  setting  aside  the  old  principle 
of  the  Common  law,  that  factors  could  not  pledge  the 
property  of  their  principals  ;  and  in  the  ^-ear  1830  the 
New  York  Factor's  Act  was  passed,  based  upon  the 
English  statute.  It  provides  that  every  factor  or  other 
agent,  entrusted  with  the  possession  of  any  bill  of 
lading,    custom-house    permit   or  warehouse-keeper's 


*  Benjamin,  on  Sales,  Sec.  809. 

t  Allen  vs.  St.  Louis  Bank,  130  U.  S.  37. 

Navulshaw  vs.  Brownrigg,   1  Sim.  N.  S.  573,  and  2  I).  M.  and  G 
441. 

Vickers  vs.  Hertz,  L.  R.  2  H.  L.  Sc.  113. 

Kaltenback  vs.  Lewis,  10  App.  Cas.  G17. 


438  The  Law  of  Pledge. 

receipt  for  the  delivery  of  merchandise,  and  every 
such  factor  or  agent,  not  having  the  documentary  evi- 
dence of  title,  but  entrusted  with  the  possession  of 
any  merchandise  for  the  purpose  of  sale,  or  as  security 
for  any  advances  to  be  made  or  obtained  thereon, 
should  be  deemed  to  be  the  true  owner  thereof,  so  far 
as  to  give  validity  to  any  contract  made  by  him  with 
any  other  person  for  the  sale  or  disposition  of  the 
merchandise,  for  any  advances  made  by  such  other 
person  upon  the  faith  thereof. 

485.  But  the  statute  of  New  York  does  not  appear 
to  have  afforded  complete  security  to  the  pledgee  in 
good  faith  dealing  with  a  factor;  and  it  does  not 
seem  to  be  more  than  the  first  progressive  step  of 
departure  from  the  rule  of  the  Common  law.  Under 
the  provisions  of  the  statute  alluded  to,  the  pledgee  is 
only  protected  against  the  claim  of  the  true  owner  of 
the  goods,  if  he  had  no  knowledge  that  he  was  deal^ 
ing  with  a  factor.  Thus,  in  a  case  decided  by  the. 
Supreme  Court  of  New  York  and  quoted  approvingly 
by  the  Supreme  Court  of  the  United  States,  it  is  said  : 
"  The  obvious  meaning  is,  that  the  factor  or  other 
agent  who  has  been  entrusted  with  certain  docu- 
mentary evidence  of  title,  or  with  the  possession  and 
ostensible  ownership  of  the  property  shall  be  deemed 
the  true  owner  so  far  as  may  be  necessary  to  protect 
those  who  have  dealt  with  him  upon  the  faith  thereof, 
that  is,  upon  the  faith  induced  by  the  usual  indicia 
of  title,  that  he  was  the  true  owner  of  the  property. 
The    second    section    of    the    British    statute,    which 


Pledge  by  Factor.  439 

answers  vei)-  nearly  to  the  third  section  of  our  own, 
contains  a  proviso  which  expressly  saves  the  rights  of 
the  true  owner  where  the  pledgee  had  notice  that  he 
was  dealing  with  an  agent ;  and  our  statute,  though 
framed  in  a  different  manner,  was  evidently  designed 
to  produce  the  same  result.  It  is  impossible  to 
suppose  that  the  Legislature  intended  to  enable  the 
factor  to  commit  a  fraud  upon  his  principal,  by  pledg- 
ing or  obtaining  advances  upon  the  goods  for  his  own 
purposes,  when  the  pledgee  or  person  making  the 
advances  knew  that  he  was  not  dealing  with  the  true 
owner.    * 

486.  The  statute  purports  to  protect  the  pledgee 
who  deals  with  a  factor  or  other  agent  entrusted  with 
the  possession  of  any  bill  of  lading  or  warehouse 
receipt  for  the  delivery  of  merchandise,  or  with  a 
factor  or  other  agent,  ?iot  having  the  documentary 
evidence  of  title ^  but  entrusted  with  the  -possession  of 
any  merchandise  for  the  purpose  of  sale  or  as  secur- 
ity for  any  advances  to  be  made  thereon.  But  the 
court  of  New  York  has  several  times  decided  in  con- 
struing this  law  that  the  factor  or  other  agent  must 
have  come  honestly  to  the  possession  of  the  goods  of 
his  principal  in  order  that  the  pledgee  should  be  pro- 
tected, however  innocent  he  might  be  of  the  fraud 
committed  by  the  agent  in  obtaining  the  possession. 
In  other  words,  the  court  held  that  the    owner  could 


*  Stevens  vs.  Wilson  (1S44),  G  Hill  512,  514. 
Allen  vs.  St.  Louis  Bank,  120  U.  S.  34. 
Cartwright  vs.  Wilmerding,  24  X.  Y.  534. 
Howland  et  al.  vs.  Woodruff  et  «/.,  60  N.  Y,  73. 


440  The  Law  of  Pledge. 

not  be  said  to  have  entrusted  his  agent  with  the  pos- 
session of  the  goods  when  the  agent  had  induced  the 
principal  by  fraudulent  means  to  place  him  in  such 
possession  and  had  defrauded  him.  It  is  equivalent 
to  saving  that  he  who  commits  a  breach  of  trust  had 
not  been  trusted.  The  converse  is  the  logical  propo- 
sition. He  has  not  committed  a  breach  of  trust  who 
was  not  trusted.  The  factor  or  agent,  with  the  inten- 
tion of  defrauding  his  principal,  and  by  means  of  false 
representations,  induces  him  to  put  the  goods  in  the 
agent's  possession.  How  can  it  be  said  that  the 
owner  has  not  entrusted  his  agent  with  the  possession 
of  the  goods  .-*  It  is  clear  that  he  has  done  nothing 
else. 

487.  The  State  of  ^Massachusetts  has  taken  a  more 
decided  position  in  this  matter,  and  its  statute  gives  the 
pledgee  dealing  with  a  factor  a  more  ample  protection. 
Among  other  provisions  on  the  subject,  it  enacts  that, 
when  a  consignee  or  factor  having  possession  of 
merchandise  with  authority  to  sell  the  same,  or  having 
possession  of  a  bill  of  lading,  permit,  certificate,  or 
order,  for  the  delivery  of  merchandise,  with  like 
authority  deposits  or  pledges  such  m,erchandise  or  any 
part  thereof,  or  such  document,  with  any  other  person 
as  a  security  for  money  or  merchandise  advanced,  or 
a  negotiable  instrument  given  by  him  upon  the  credit 
thereof,  such  other  person,  if  he  makes  such  loans, 
advances  and  exchanges,  in  good  faith  and  with 
probable  cause  to  believe  that  the  agent,  making  the 
deposit  or    pledge,   had    authorit}-  so  to  do,  and  was 


Pledge  hy  Factor.  441 

not  acting  fraudulently  against  the  owner  of  such 
merchandise,  shall  acquire  the  same  interest  in,  and 
authority  over,  such  merchandise  and  documents  as 
he  would  have  acquired  thereby  if  the  agent  had  been 
the  actual  owner  thereof,  notwithstanding  he  had 
notice  of  such  agency.'^ 

488.  But,  where  the  pledgee  knew  that  the  factor 
was  not  authorized  by  his  principal  to  pledge  the 
goods,  it  has  been  held  that  he  was  not  a  holder  for 
value  and  had  no  right  against  the  true  owner.  In 
such  a  case,  the  statute  does  not  protect  the  third  per- 
son dealing  with  the  factor. f 

It  was  also  decided  that  the  pledgee  receiving  the 
goods  from  the  factor  in  security  of  an  antecedent  debt 
of  the  latter  was  not  a  holder  for  value. ^ 

489.  The  State  of  Louisiana  has  retained  the  rule 
of  the  Common  law,  that  the  factor  can  not  validly 
pledge  the  property  of  his  principal  without  the  latter's 
consent  to  secure  the  factor's  debt.  The  jurisprudence 
of  that  State  has  carried  the  principle  to  its  extreme 
limit,  notwithstanding  the  efforts  of  its  Legislature  to 
change  it.  The  latest  decision  on  this  subject  declares 
in  the  words  of  Chancellor  Kent,  which  it  quotes, 
that:  "  Though  a  factor  may  sell  and  bind  his  prin- 
cipal, he  can  not  pledge  the  goods  as  a  security  for  his 
own  debt,  even  though  there  be  the  formality  of  a  bill 
of  parcels  and  a  receipt.  The  principal  may  recover 
the  goods  of  the  pawnee,  and  his    ignorance   that  the 

*  G.  S.  I860,  C.  34;  P.  S.  1882,  C.  7]. 

t  Goodwin  vs.  Loan  Company,  152  Mass.  100. 

X  Ibid. 


442  The  Law  of  Pledge. 

factor  held  the  goods  in  the  character  of    factor   is  no 
excuse.      "'     '"      * 

"■'  The  doctrine  that  a  factor  can  not  pledge  is  sus- 
tained so  strictly  that  it  is  admitted  he  can  not  do  it  by 
endorsement  and  delivery  of  the  bill  of  lading  any  more 
than  b)-  delivery  of  the  goods  themselves.  To  pledge 
the  goods  of  the  principal  is  beyond  the  scope  of  the 
factor's  powder;  and  every  attempt  to  do  it  under  the 
color  of   a  sale  is  tortious  and  void/'"^'* 

490.  The  State  of  Louisiana  is  governed  bv  the 
Civil  law,  which  it  has  taken  principally  from  the 
French  law,  and  its  Civil  Code  is  very  nearly  a  tran- 
scription from  the  Code  Napoleon.  But  in  all  mat- 
ters of  Commercial  law,  in  the  absence  of  legislation, 
it  follows  the  general  American  jurisprudence.  This 
accounts  for  the  fact  that,  in  the  case  alluded  to,  the 
court  rested  its  decision  upon  the  Common  law  au- 
thorities. 

491.  It  is  curious,  however,  to  observe  in  passing, 
on  the  subject  of  those  two  Civil  Codes,  that  that  of 
Louisiana  contains  numerous  definitions,  for  which  it 
has  been  criticised  by  law  writers,  and  that  the  Code 
Napoleon,  on  the  contrary,  contains  no  definitions  at 
all,  for  which  it  has  been  equallv  criticised. f 

492.  The  court  in  the  case  just  cited  of  Lallande  vs. 
His  Creditors,  quotes  also  in  support  of  its  judgment 
an  article   on    the    Civil    Code    of  Louisiana,  which   is 


*  2  Kent,  p.  626. 

Lallande  vs.  His  Creditors,  42  La.  An.  710, 
t  De  St.  Joseph,  Concordance  des  Codes. 


Fledge  by  Factor.  443 

more  doctrinal  than  statutory,  to- wit :  "  One  person 
may  pledge  the  property  of  another,  provided  it  be 
with  the  express  or  tacit  consent  of  the  owner. 

"  But  this  tacit  consent  must  be  inferred  from  cir- 
cumstances, so  strong  as  to  leave  no  doubt  of  the 
owner's  intention ;  as  if  he  were  present  at  the  mak- 
ing of  the  contract,  or  if  he  himself  delivered  to  the 
creditor  the  thing  pawned."* 

493.  Yet,  as  far  back  as  in  the  year  1868,  the 
Legislature  of  Louisiana  has  attempted  to  modify,  at 
least,  the  Common  law  in  its  rigid  rule,  and  to  enable 
factors  to  pledge  the  property  of  their  principals  to  a 
certain  extent  and  under  certain  circumstances.  A 
statute  of  that  year  provides:  ''That  cotton  press 
receipts  given  for  any  goods,  wares,  merchandise, 
grain,  flour,  or  other  produce  or  commodity  stored 
or  deposited  with  any  cotton  press,  wharfinger,  or 
other  person,  or  any  bill  of  lading  given  by  any  for- 
warder, boat,  vessel,  railroad,  transportation  or  trans- 
fer company,  may  be  transferred  by  endorsement 
therein,  and  any  person  to  whom  the  same  may  be 
transferred  shall  be  deemed  and  taken  to  be  the  owner 
of  the  goods,  wares,  merchandise,  grain,  flour,  or 
other  produce  or  commodity  therein  specified,  so  far 
as  to  give  validity  to  any  pledge^  Iie?i  or  transfer 
made  or  created  by  such  person  or  persons',  but  no 
property  shall  be  delivered  except  on  surrender  and 
cancellation  of  said  original  receipt  or  bill  of  lading, 
of  the   endorsement  of  such   delivery  thereon  in  case 


Civil  Code,  Arts.  3145  and  31 4G. 


444  The  Law  of  PLEDae. 

of  partial  delivery.  All  cotton  press  receipts  or  bills 
of  lading,  however,  wbic^h  shall  have  the  w^ords  '  Not 
Negotiable '  plainly  written  or  stamped  on  the  face 
thereof,  shall  be  exempt  from  the  provisions  of  this 
section . 

*  *  *  * 

"  That  all  receipts,  bills  of  lading,  vouchers  or 
other  documents  issued  by  any  cotton  press,  wharfin- 
ger, forwarder,  or  other  person^  boat,  vessel,  railroad, 
transportation  or  transfer  company,  as  by  act  provided, 
shall  be  negotiable  by  endorsement  in  blank  or  by 
special  eiidorseinent^  in  the  same  manner  and  to  the 
same  extent  as  bills  of  exchano-e  and  promissory  notes 
now  rt'rg."* 

494.  It  would  seem  clear  that  the  Legislature  bv 
that  law  intended  to  enable  factors  to  pledge  the  goods 
in  their  possession,  and  to  protect  the  pledgees  against 
the  true  owner*  but  the  Court,  in  the  same  case  of 
Lallande  vs.  His  Creditors,  held  that  the  bill  of  lading 
was  not  made  to  Lallande,  or  order  or  assigns^  but 
to  him  alone,  and  that,  therefore,  he  could  not  trans- 
fer it  by  endorsement.  Whatever  may  be  the  merits 
of  this  ruling,  the  court  does  not  stop  at  that  princi- 
ple, but  strikes  at  the  statute  in  full,  and  says : 
"  But  in  any  event,  an  endorsement  of  a  bill  of  lading 
has  not  a  like  effect  as  the  endorsement  of  bills  and 
notes."  And  the  court  cites,  in  support  of  this  prin- 
ciple, the  case  of  Shaw  vs.  Railroad  Company,  loi 
U.  S.  557,  in  which  the  Supreme  Court  of  the  United 

*  Acts  of  IS6S,  p.  ]93. 


Pledge  by  Factor.  445 

States  passing  upon  tlie  statute  of  Missouri  decided 
that  bills  of  lading  were  not,  under  its  provisions, 
negotiable  like  bills  of  exchange  and  promissor}^  notes. 
The  decision  of  the  Supreme  Court  is  no  authority  for 
that  of  the  court  of  Louisiana.  The  statute  of  Mis- 
souri provides  that:  "  Bills  of  lading  shall  be  nego- 
tiable by  written  endorsement  thereon  and  deliver}', 
hi  the  same  manner  as  bills  of  exhange  and  promis- 
sory notes."  Passing  upon  this  provision  of  the 
statute,  the  Supreme  Court  said:  "  If  these  (the  con- 
sequences of  full  negotiability)  were  intended,  surely 
the  statute  would  have  said  something  more  than 
merely  make  them  negotiable  by  endorsement. 
No  statute  is  to  be  construed  as  altering  the  Common 
law  farther  than  its  words  import.  It  is  not  to  be  con- 
strued as  making  an}'  innovation  upon  the  Common 
law  which  it  does  not  fairly  express.  Especially  is  so 
great  an  innovation  as  would  be  placing  bills  of  lading 
on  the  same  footing  in  all  respects  with  bills  of  ex- 
change not  to  be  inferred  from  words  that  can  be  fully 
satisfied  without  it."* 

495.  These  words  of  the  Supreme  Court  militate 
against  the  ruling  of  the  Court  of  Louisiana,  because 
the  statute  of  the  latter  State  fairly  expresses  the  in- 
tention of  making  the  innovation  upon  the  Common 
law.  This  statute  says  more  than  that  of  Missouri ; 
it  provides  not  only  that  bills  of  lading  shall  be  nego- 
tiable in  Ihe  same  manner  as  bills  of  exchange  and 
promissory  notes,  but  shall  be  so  to  the  same  extent  as 

*  Shaw  vs.  Railroad  Company,  101  U.  S.  505, 


446  The  Law  of  Pledge. 

those  negotiable  instruments.  The  words  io  the  same 
extent  mean  clearly  fully  as  negotiable  as  bills  of  ex- 
change and  promissory  notes.  There  is  no  ambi- 
guity in  those  terms ;  they  mean  what  the}'  say. 
With  the  intention  to  render  bills  of  lading  as  com- 
pletely negotiable  as  any  other  negotiable  instru- 
ments, the  Legislature  could  not  have  used  words 
more  expressive  of  its  will.  And  it  is  well  to  observe 
in  that  respect,  that  the  first  Missouri  statute,  of  the 
year  1868,  contained  also  the  words  to  the  same  extent^ 
but  was  amended  b}'  the  statute  of  1869,  which  re- 
pealed the  section  containing  those  words  and  ren- 
dered bills  of  lading  negotiable  onl}-  /;;  the  same 
manner  as  bills  and  notes.  The  statute  of  1869  is  the 
one  passed  upon  h\  the  Supreme  Court  of  the  United 
States  in  Shaw  vs.  Railroad  Company.  Tliis  case 
was  decided  in  1879.  Later  on,  in  the  year  1886, 
the  Supreme  Court  of  the  United  States  had  again 
occasion  to  pass  upon  the  Missouri  statute  of  1869, 
and  held  that  the  holder  of  a  bill  of  lading,  under  its 
provisions,  was  not  a  holder  for  value  if  the  .endorse- 
ment on  the  bill  was  not  /;;  ivi'itlng.^ 

496.  Returning  now  to  the  statute  of  Louisiana  of 
1868,  we  may  reasonably  conclude  that  the  question 
of  the  full  negotiability  of  a  bill  of  lading,  and  of  the 
validity  of  the  pledge  b}'  a  factor,  and  of  the  rights 
of  the  pledgee  in  good  faith  against  the  true  owner, 
is  not  settled  b}'  the  decision  in  Lallande  vs.  His 
Creditors,  because  the    judgment  in   that  case  rested 

*  Allen  vs.  St.  Louis  Bank.  120  V.  S.  20. 


Pledge  by  Factor.  447 

upon  the  fact  that  the  bill  of  lading  was  not  made  to 
the  order  of  the  consignee  ;  the  other  reasons  in  the 
decision  being  mere  dicta,  unsupported  by  authority. 
497.  This  is  the  only  statute  of  Louisiana  which 
provides  for  the  pledge  of  bills  of  lading  by  factors  ; 
but  there  are  other  laws  in  that  State,  passed  subse- 
quently, which  provide  for  the  pledge  of  warehouse 
receipts  by  factors,  a  subject  which  has  occupied  both 
the  Legislature  and  the  courts  very  considerably,  and 
which  we  have  examined  in  a  different  chapter. 


CHAPTER  XLII. 
Pledge  by  the    Factor  in  the  Civil  Law. 

49S.  There  is  no  distinction  in  the  Civil  law  to  be 
made  between  pledges  by  factors,  depositories,  com- 
mon carriers,  agents,  trustees  or  other  possessors  of 
movable  or  personal  property.  The  pledgee  in  good 
faith,  for  value,  and  without  notice  of  adverse  rights, 
is  protected  against  the  true  owner.  Such  was  the 
rule  of  the  old  commercial  Common  law  of  the  few 
countries  of  continental  Europe  where  commerce  was 
already  blooming  when  in  England  the  nation  was 
wasting  its  energies  in  civil  or  foreign  wars,  and  trade 
was  yet  in  its  infancy.  In  Italy,  which  may  be  con- 
sidered as  the  cradle  of  European  commerce,  when  it 
emerojed  from  the  icrnorance  and  barbarism  of  the 
Middle  Ages,  the  principle  of  protection  to  the  honest 
pledgee  of  goods  pledged  by  a  factor  was  soon  recog- 
nized and  firmly  established  as  a  rule  of  the  Common 
law,  based  upon  the  necessities  of  trade.  Casaregis, 
the  early  oracle  of  Commercial  law  in  Italy,  writing 
in  the  latter  part  of  the  sixteenth  century,  and  citing 
the  paramount  authority  of  Cardinal  Deluca,  sa^'s 
with  great  positiveness  : 

"  Et  similiter,  ob  eam  rationem  non  turbandcE 
libertatis  commercii,  in  dubitabilioribus  terminis, 
nempe  mercatoris,  vel  magistri  navis,  vel  vectoris, 
mala  fide  alienantis,  vel  distrahentis,  sen    disponentis 


450  The  JjAW  of  Pledge. 

de  rebus  uut  mercibus  sui  respective  corresponsoris 
principalis  contra  illius  mentem,  seu  ordines ;  quod 
alter  mercator  illorum  emptor,  seu  acquisitor  ex  aliquo 
titulo  oneroso,  non  tenetur  domino  illas  restituere, 
nisi  sibi  persoluto  tali  pretio,  firmat  Cardinalis  De- 
luca."* 

499.  The  principle  and  the  reason  of  it  are  thus 
forcibly  stated.  The  merchant  who  has  given  value 
for  the  goods  fraudulently  disposed  of  by  an  agent, 
in  whatsoever  quality  the  latter  represents  his  princi- 
pal, is  not  bound  to  surrender  them  to  the  owner 
unless  the  consideration  he  gave  for  them  is  returned 
to  him.  And  this,  because  the  liberty  of  commej'ce 
7nust  not  be  disturbed . 

500.  Troplong,  over  two  centuries  later,  himself 
the  greatest  expounder  of  the  Civil  law  of  pledge, 
says  with  emphasis,  after  quoting  the  words  of 
Casaregis : 

"  And,  indeed,  where  would  commerce  be,  when 
it  is  so  necessary  that  its  business  should  be  rapidl}- 
ofone  throuofh,  when  adverse  claims  disturb  the  entries 
made  in  the  books  of  merchants,  when  negotiations 
once  entered  into  can  not  be  questioned  without  im- 
mense danger;  where  would  commerce  be  if  it  were 
permitted  to  any  one  to  come  and  pretend  that  such 
goods  as  have  been  sold,  delivered,  pledged,  do  not 
belong  to  the  person  who  has  disposed  of  them  ?  "  f 


'*  Casaregis.  Be  credito.  Disc.  22.  Xo.  ]0. 
t  Troplong,  Nantissement.  p.  77. 


Pledge  by  the  Factor  in  the  Civil  Law.  451 

And  he  gives  some  striking  instances,  cited  by 
Casaregis,  of  pledges  by  factors  in  which  the  pledgee 
was  protected  against  the  claim  of  the  true  owner. 

One  of  these  cases  is  that  of  Berzino  and  Minuti, 
merchants  of  Florence,  who  had  received  from  Cav- 
aglieri,  a  merchant  of  Ferrara,  a  consignment  of  silks, 
with  instructions  to  sell  them.  Berzino  and  Minuti 
pledged  the  silks  to  Vanni,  contrary  to  orders,  to 
secure  a  loan  of  money  they  obtained  from  him  for 
their  own  account.  Later,  Berzino  and  Minuti  sold 
the  silks  to  Chiavitelli,  with  the  understanding  that 
he  should  pay  Vanni  the  amount  of  the  loan.  Ber- 
zino and  Minuti  subsequently  went  into  bankruptcy, 
and  Cavaglieri,  the  original  owner  of  the  silks,  de- 
manded that  Chiavitelli  should  pay  to  him  the  price 
of  the  sale.  Vanni  opposed  this  demand,  contending 
that  his  right  as  pledgee  was  superior  to  that  of  the 
owner. 

Cavaglieri  insisted  upon  his  right  of  ownership,  con- 
tending that  his  factors  had  no  power  to  pledge  his 
goods  without  his  consent,  and  that  he  should  be  pro- 
tected against  the  transferee  a  no7i  do?nino  of  a  thing- 
fraudulently  disposed  of.  The  Court  upheld  the  claim 
of  Vanni,  and  decreed  the  validity  of  his  pledge.  This 
case  is  directly  in  point  of  the  doctrine  of  the  Civil 
Law  that,  even  if  the  factor  has  no  power  to  pledge 
the  property  of  his  principal  without  the  latter's  con- 
sent, the  pledgee  in  good  faith  can  not  be  disturbed 
by  the  owner.* 


Troplong,  Nantissement,  p.  75. 
Ibid.,  pp.  72  and  78. 


452  Thi:  Jjaw  of  Pledge. 

501.  Troplong  relates  another  instance  of  the  same 
kind  cited  by  Casaregis,  and  says  that  the  latter 
extends  the  rule  to  all  cases  in  which  the  third  person 
is  in  good  faith.  Whether  the  possessor,  guilt}-  of 
breach  of  trust,  is  a  ship's  captain,  a  common  carrier, 
a  factor,  an  agent,  an  overseer,  a  depositary,  a  pledgee, 
is  of  no  consequence.  No  doubt  he  has  committed  a 
breach  of  trust,  but  third  persons  should  not  be  made 
to  suffer.  The  owner  must  blame  himself  for  having 
misplaced  his  confidence.  Troplong  gives  also  several 
cases  in  which  the  French  courts  applied  the  like  rule 
in  the  early  jurisprudence  of  France,  though  there  had 
been  at  that  time  conflicting  decisions  on  that  subject. 

502.  There  is  no  longer  in  France  or  in  the  coun- 
tries which  followed  its  legislation  any  doubt  that  the 
pledge  made  by  the  possessor  of  movable  property  to 
a  third  person  without  notice  is  valid  against  the  true 
owner,  whether  the  pledgeor  is  a  factor  or  not  and 
Avheth^jr  he  acts  against  orders. 

No  doubt  there  may  be  fraud  or  abuse  of  authorit}' 
in  such  cases,  but  innocent  third  persons  should  not 
be  made  to  suffer  for  it.  It  is  the  oiviier  of  the  prop- 
erty "duho  should  bear  the  consequences  of  his  otvn  ill- 
placed  confdence.  Such  is  the  rule  of  the  Civil 
law." 

503.  It  is  only  when  the  owner  has  not  placed  his 
confidence  in  an  agent,  but  when  his  property  has  been 
stolen  or  been  lost,  that  he  can  recover  it  from  the 
vendee  or  pledgee  in  good   faith.      Then  the  principle 

*  Troplong,  Xantissement,  Sec.  77,  p.  79;  Sec.  73,  p.  74. 


Pledge  by  the  Factor  in  the  Civil  Law.         453 

that  the    possession    of    movables  is  equivalent  to  title 
does  not  prevail,'" 

504.  Troplong  concludes,  after  citing  the  law  and 
the  decisions  in  France,  by  these  words:  "  Such  is 
the  Commercial  law.  Such  is  the  jurisprudence.  We 
see  how  much  our  Art.  2279  is  favorable  to  the  com- 
mercial interests.  The  harmony  between  the  Civil 
law  and  the  Commercial  law  is  manifest  here  :  one 
fortifies  and  enlightens  itself  by  the  other. "f 

Art.  2279  of  the  Code  Napoleon  is  the  one  which 
consecrates  the  principle  of  the  French  law  that  the 
possession  of  movable  or  personal  property  is  equiva- 
lent to  title. 

505.  The  Code  of  Commerce  of  France  defines 
the  factor  as  ''  one  who  acts  in  his  oivn  name,  or 
under  a  firm  name,  for  account  of  a  principal."^ 

Commenting  upon  the  words  of  this  article,  in  his 
owji  namej  Mr.  Rogron  says  that  there  is  again  there 
an  essential  difference  between  the  ordinary  agent  and 
the  factor :  the  factor  acts  /;/  Iiis  own  7iame  for 
account  of  the  principal,  whilst  the  agent  acts 
in  the  name  of  the  principal.  Celerity  and  secrec}-, 
so  necessary  to  the  prosperity  of  commerce,  demanded 
this  modification  of  the  common  law.  Third  persons 
who  deal  with  the  factor,  and  to  whom  he  is  directl}' 
liable,  are  not  in  the  necessit}-  of  losing  their  time  to 
seek    information  of  the  persons  for  whom  the    factor 


*  Laurent,  Xantisseinent.  Sec.  441 . 

Pont,  Nantissement,  Sec.  1073.  pp.  .")7.^).  r)7<;. 
t  Troplong,  Nantissement,  p.  79. 
j  Code  de  Connuerce,  Art.  94. 


454  The  Law  of  Pledge. 

is  acting,  and  the  secret  which  those  persons  may 
wish  to  keep  is  thereby  respected.  It  has  been  de- 
cided in  consequence  of  this  that  the  factor,  author- 
ized by  his  principal  to  act  in  his  own  name,  is,  for 
that  very  reason,  invested  with  the  right  to  dispose  of 
the  things  which  the  principal  has  placed  in  his  pos- 
session, and,  for  instance, /6>  -pledge  them  j  in  which  case 
the  principal  has  no  right  to  inquire,  so  far  as  third 
persons  are  concerned,  if  the  factor  has  disposed  of 
the  things  conformably  to  his  instructions.  The  prin- 
cipal, in  eliminating  himself,  and  showing  the  factor 
alone  to  the  world,  has  renounced  all  claims  against 
third  persons,  and  for  the  same  reason  the  third  per- 
sons have  no  claims  against  the  principal.  The  latter 
has  any  rights  against  the  former,  only  if  they  have 
been  in  bad  faith  and  knew  that  the  factor  was  ex- 
ceeding his  authority  and  disposing  of  his  principal's 
property  in  his  own  interest.  * 

506.  The  question  presented  itself  again  and 
squarely  before  the  Court  of  Cassation  in  the  year 
1 87 1,  and  was  again  emphatically  decided  in  the 
sense  that  the  pledgee  in  good  faith  is  protected 
against  the  true  owner,  whose  factor  has  fraudulently 
pledged  the  goods  of  his  principal  contrary  to  orders 
and  for  his  own  benefit.  The  case  is  that  of  the 
Bank  of  Martinique  vs.  Thomas  and  others,  reported 
in  the  Journal  du  Palais,  3'^ear  1871,  p.  148. 

The  reporters  of  the  case  state  the  substance  of  the 
decision   in   these  words :    "But   the  question  is  com- 

*  Rogron,  Code  de  Commerce,  explique,  p.  219. 


Pledge  by  the  Factor  jn  the  Civh.  Law.         455 

plicated  when  the  factor  has  disposed  of  things 
belonging  to  the  principal.  The  latter  would  then 
be  interested  in  opposing  to  third  persons  the  restric- 
tive conditions  of  the  power  of  attorney  which  he  has 
given,  if  the  disposition  of  the  property  has  been 
made  against  those  conditions,  if,  for  instance,  the 
factor,  instructed  to  sell  the  goods,  has  pledged  them 
to  secure  a  loan  contracted  in  his  own  interest.  But 
has  the  principal  any  right  to  oppose  the  terms  of  his 
mandate  to  third  persons. -*  The  Court  of  Cassation 
proclaims  with  great  energy,  in  this  case,  that,  when 
the  goods  have  been  placed  at  the  disposal  of  a  factor 
by  the  endorsement  of  a  bill  of  lading,  or  by  actual 
delivery,  the  factor,  authorized  to  act  in  his  own  name, 
may  consent  all  kinds  of  alienation  or  conveyance 
which  are  consistent  with  the  trade  of  such  goods. 
He  can  act  as  owner,  at  least  for  an  onerous  considera- 
tion. He  can  do  so  validly  in  regard  to  third  persons. 
If  he  exceeds  his  authority  and  violates  the  instruc- 
tions he  has  received,  he  is  responsible  toward  his 
principal ;  but  the  disposition  of  the  property  is 
effective  in  favor  of  third  persons.  In  other  words, 
the  distinction  which  is  made,  in  regard  to  the  ordi- 
nary agent^  between  the  unauthorized  act  from  which 
third  persons  have  to  suffer,  and  the  abuse  of  the 
mandate  from  which  the  principal  must  suffer,  is  not 
applicable  to  the  factor  who  acts  in  his  own  name. 
The  reason  of  it  is  evident :  third  persons  have  not 
got  to  concern  themselves  with  the  limits  of  a  power 
of  attorney    which    is    not  submitted   to  them.     The 


45G  The  Law  of  Pledge. 

factor  has  all  authority,  because  the  act  which  empowers 
him  remains  entirely  unknown  to  third  persons. 
The  omnipotence  of  the  factor  receives  no  other 
restriction,  so  far  as  third  persons  are  concerned,  than 
that  which  results  from  fraud  and  bad  faith.  The 
third  person  who  would  have  connived  with  the  factor 
to  injure  the  principal,  and  would  knowingly  and 
fraudulently  have  profited  bv  a  violation  of  the 
restrictive  instructions  given  to  the  factor,  would  be 
responsible  toward  the  principal,  and  consequenth^ 
could  not  avail  himself  of  the  transfer  consented  by 
the  factor."* 

507.  We  see,  therefore,  on  one  hand  that  the  whole 
tendency  of  the  Common  law  and  of  its  jurisprudence 
is  to  protect  the  owner  of  personal  property  against 
even  an  honest  transferee,  whethor  vendee  or  pledgee, 
if  the  owner  has  been  fraudulently  deprived  of  his  prop- 
erty by  his  agents.  And  we  see,  on  the  other  hand, 
that  the  legislation  and  jurisprudence  of  the  Civil 
law,  on  the  contrar}',  are  equally  bent  upon  protect- 
ing the  honest  vendee  or  pledgee,  without  notice,  even 
against  the  true  owner  of  the  property,  who  has  been 
fraudulently  deprived  of  it  by  his  agent. 

508.  The  reason  of  the  Common  law  is  twofold: 
first,  it  is,  that  nobody  can  transfer  a  right  which  he 
himself  has  not,  or  is  not  authorized  by  the  owner  to 
transfer;  and,  secondly,  that  the  transferee  must  at  his 
peril  ascertain  if  the  transferror  is  the  true  owner  of  the 
property  or  is  authorized   bv  the  true  owner  to  trans- 

*  Journal  du  Palais,  1871,  p.  14.^. 


Pledge  hy  the  Factor  in  the  Civil  Law.         457 

fer  it.  If  he  does  not  ascertain  this  fact,  he  can  only 
blame  himself  and  must  suffer  in  consequence.  The 
vendee  or  pledgee  takes  the  property  at  his  peril,  and 
must  inquire  as  to  the  title  before  he  takes  it. 

Both  the  law  writers  and  the  courts  have  proclaimed 
these  principles  with  no  little  positiveness.  Mr.  Jones, 
quoting  from  adjudicated  cases,  says  that  at  Common 
law  a  person  in  possession  of  goods  can  not  confer  on 
another,  either  by  sale  or  by  pledge,  any  better  title 
than  himself  has/" 

509,  In  a  recent  case  in  which  a  dishonest  agent 
was  in  possession  of  goods  by  means  of  warehouse 
receipts  taken  in  his  own  name,  and  pledged  them  to 
an  innocent  third  person,  the  Court  of  New  York  said  : 
"  While  mere  possession  of  goods  is  frequently  ^r/w^ 
/tide  evidence  of  title,  it  is  merely  prima  facie. 
Whoever  deals  with  the  possessor  does  it  at  his  peril, 
and  a  purchaser  from  one  having  no  other  apparent 
title  to  goods  than  the  possession  thereof  must  see  to 
it  that  the  seller  has  the  title  ;  and  if  his  title  fails  and 
he  is  obliged  to  respond  to  the  true  owner  of  the 
goods  his  loss  is  due  to  his  own  misplaced  confidence 
and  not  to  that  of  the  owner.  Owners  of  goods  for 
commercial  and  other  purposes  must  frequently  entrust 
others  with  possession  of  them,  and  the  affairs  of  men 
could  not  be  conducted  unless  they  could  do  so  with 
safety."  f 

510.  The   Supreme  Court  of    the  United  States,  in 


*  Jones,  on  Pledge,  See.  328. 

t  Soltau  vs.  Gerdau,  119  \.  Y.  Hi)? 


458  The  Law  of  Pledge. 

the  case  of  Shaw  vs.  Raihoad  Company,  loi  U.S., 
p.  565,  remarks  that  the  law  has  most  carefully  pro- 
tected the  ownership  of  personal  property,  other  than 
jnoney,  against  misappropriation  by  others  than  the 
owner,  even  when  it  is  out  of  his  possession ;  and 
•this  protection  would  be  largely  withdrawn  if  the  mis- 
appropriation of  its  symbol  or  representative  could 
avail  to  defeat  the  ownership,  even  when  the  person 
who  claims'  under  a  misappropriation  had  reason  to 
believe  that  the  person  from  whom  he  took  the  prop- 
erty had  no  right  to  it. 

This  shows  and  expresses  the  true  spirit  of  the  Com- 
mon law  on  this  subject,  and  confirms  what  we  have 
just  said,  that  the  whole  tendency  of  the  Common 
law  and  its  jurisprudence  is  to  protect  the  owner  of 
personal  property,  even  against  an  innocent  trans- 
feree, in  direct  opposition  and  full  contrast  to  the  Civil 
law. 

511.  But  personal  or  movable  property  has  no  fol- 
lowing or  apparent  title.  Mobilia  non  habent  sequel- 
lam.  How  is  the  ascertainment  of  the  true  ownership 
to  be  made.^  The  questioning  of  a  dishonest  agent  for 
information  is  desultory.  If  he  is  capable  of  defrauding 
his  principal  he  is  likely  to  deceive  the  third  person. 
Then  how  can  the  pledgee  or  vendee  of  commercial 
effects  or  merchandise  afford  to  consume  any  length  of 
time  in  pursuit  of  the  information,  when  commercial 
business  demands  immediate  action .?  An  all-important 
exception  has  been  made  to  the  rule  of  the  Common 
law  in  favor  of  negotiable  paper.      A  dishonest    holder 


Pledge  bv  the  K\ctok  ix  the  Civil  Law..         459 

of  such  paper  transfers  to  a  bona  Jide  taker  for  value  a 
right  which  he  does  not  himself  have.  The  true 
owner  has  no  claim  or  right  against  this  vendee  or 
})ledgee  of  his  stolen  or  purloined  property.  Why? 
Because  the  necessities  of  commerce  demanded  it. 
The  necessities  of  commerce,  then,  are  the  supreme 
law.  The  right  of  the  true  owner,  sacred  ns  it  is, 
and  protected  as  it  is,  must  yield  to  the 
public  interest.  Is  there  not  the  same  reason  for 
bending  the  rigor  of  the  Common  law  in  the  case  of 
other  commercial  effects  or  merchandise?  And  ought 
not  the  pledgee  who  receives  bills  of  lading,  ware- 
house receipts,  the  representatives  of  personal  com- 
mercial property,  or  the  merchandise  itself,  from  a 
factor,  be  equall}-  protected,  and  the  true  owner 
equally  sacrificed  to  the  public  interest?  Do  not  the 
necessities  of  commerce  demand  this  also?  Clearly, 
they  do.  And  hence  the  legislation  in  England  and 
in  some  States  of  the  Union  which  changed  the  Com- 
mon law  in  that  respect,  and  even  made,  or  attempted 
to  render  bills  of  lading  and  warehouse  receipts 
fiegotiable  in  the  same  manner  and  to  the  same  exteiit 
as  bills  of  exchange  and  promissory  notes.  Such 
legislation  is  evidently  a  stride,  and  a  long  stride,  of 
progress,  and  is  very  likely  to  be  followed  in  ail  com- 
mercial centres. 

512.  Judge  Stor}',  speaking  of  the  inconvenience 
and  harshness  of  the  doctrine  of  the  Common  law, 
by  which  the  pledge  by  the  factor  to  an  innocent  third 
person  is  invalid,  makes  a  very  curious  and  interesting 
remark.      He  observes  that  the  general  denial  of  the 


460  The  Law  of  Pledue. 

right  to  pledge  b}-  factors  does  not  appear  to  have 
approved  itself  to  the  minds  of  Lord  Eldon  and  Lord 
Ellenborough ;  and  that  it  has  been  suggested  by 
Mr.  Bell,  that  it  probably  had  its  origin  in  viistake. 
Parliament,  however,  he  says  further,  has  at  length 
interfered,  and  placed  the  doctrine  on  this  subject 
upon  a  far  more  rational  foundation  than  it  was  placed 
by  the  decisions  of  Westminster  Hall.  And,  finally, 
he  makes  the  following  reflection,  which  is  of  a  most 
significant  import  in  the  mouth  of  the  great  judge  : 
"  Considering  the  present  state  of  the  English  law  on 
this  point,  and  the  unsatisfactory  principle  on  which 
the  former  doctrine  rests,  it  would  perhaps  be  a  mat- 
ter of  regret  if  the  American  courts  should  feel 
themselves  constrained,  by  the  pressure  of  authorit}', 
to  yield  to  it."'" 

:^i3.  The  doctrine  of  the  Common  law  was  at  first 
so  absolute  that  it  was  even  contended  that  factors 
could  not  validly  pledge  the  negotiable  paper  of  their 
principals,  and  that  the  claims  of  the  true  owner 
would  defeat,  in  such  cases,  the  rights  of  a  holder  for 
value.  But  this  contention  has  been  abandoned,  and 
it  is  now  established  be^^ond  dispute  that  the  pledgee 
or  transferee  of  negotiable  paper  in  good  faith  is  pro- 
tected against  the  world,  whether  the  transferror  is  a 
fraudulent  factor  or  any  other  purloiner  of  such  prop- 
ert}- . 

514.  Chancellor  Kent,  who  wrote  before  any  of  the 
innovations    either  in  England  or  in    this  country   had 

*  Story,  on  Bailments,  Sees.  325  and  32(>. 


Pledge  by  the  Factor  in  the  Civil  Law.         461 
been  made  to  the  Common  law  in   relation  to  factors. 


and  who,  therefore,  supported  the  old  doctrine  unre- 
servedly^ says,  as  to  negotiable  paper:  "There  is  an 
exception  to  the  rule  in  the  case  of  negotiable  paper, 
for  their  possession  and  property  go  together,  and 
carr}'  with  them  a  disposing  power.  A  factor  ma}' 
pledge  the  negotiable  paper  of  his  principal  as  security 
for  his  own  debt,  and  it  will  bind  the  principal  unless 
he  can  charge  the  party  with  notice  of  the  fraud,  or 
of  want  of  title  in  the  agent."^'" 

515.  It  is  true  that  the  Common  law  will  protect  the 
innocent  vendee  or  pledgee  of  personal  property  even 
against  the  true  owner,  if  the  latter  has  put  the  indicia 
of  ownership  upon  the  agent  with  whom  the  third  per- 
son has  dealt  upon  the  faith  of  the  indicia.  But  here 
we  find  a  good  deal  of  confusion  in  the  decisions  of  the 
courts.  What  constitutes  the  indicia  of  ownership  of 
personal  property?  It  is  often  difficult  to  sa}-.  A  bill 
of  lading  in  the  name  of  the  factor  is  an  indicium  of 
ownership  ;  and  so  is  a  warehouse  receipt.  Should  any 
distinction  be  made  between  the  owner  of  goods  who 
puts  the  indicia  of  property  upon  his  factor  or  agent 
and  the  one  who  enables  the  factor  to  put  them  on 
himself  and  therebv  to  deceive  innocent  parties?  f 


*  Kent,  Comm.,  Vol.  2,  p.  627. 

Saloy  vs.  Bank,  39  La.  An.  90. 

Givanovich  vs.  Bank,  26  La.  An.  15. 
t  Adams  vs.  Bowerraan,  lOJ  X.  Y.  23. 

I'arker  vs.  Baxter,  86  N.  Y.  586. 

Barnard  vs.  Campbell,  58  N.  Y.  78. 

Honold  vs.  Meyer,  36  La.  An.  585. 

Baldwin  vs.  Ely,  9  How.  580. 

Crowley  vs.  Savings  Bank,  34  La.  An.  74. 

Am.  and  Eng.  Ency,  of  Law.  Vol.  18.  p.  634 


462  The  Law  of  Pledge. 

516.  Nothing  shows  more  strikingly  the  diversity 
of  the  human  mind  and  the  uncertainty  of  its  wis- 
dom than  the  fact  that  the  Common  law  and  the  Civil 
law  give  the  same  reason,  in  the  government  of  per- 
sonal or  movable  property,  for  rules  which  are  in 
direct  opposition  and  conflict  with  each  other.  Sa3-s 
the  Common  law :  The  loss  of  the  pledgee  dealing 
with  an  unfaithful  agent  is  due  to  his  own  misplaced 
confidence,  and  not  to  that  of  the  owner.  The  affairs 
of  men  could  not  prosper  unless  the\'  could  with  safety 
entrust  their  agents  with  their  property  for  commercial 
purposes.* 

The  Civil  law  says  :  The  loss  of  the  owner  whose 
property  is  fraudulently  pledged  by  an  agent  is  due 
to  his  own  misplaced  confidence.  He  can  only 
blame  himself.  The  honest  pledgee  must  be  pro- 
tected, or  credit  would  be  destroyed,  and  commerce 
greatly  obstructed  and  injured. f 

517.  The  rule  of  the  Civil  law  seems  to  be  the 
more  equitable,  and  its  motive  the  more  rational.  It 
is  the  owner  of  the  property  and  not  the  pledgee, 
who  has  misplaced  his  confidence  if  the  factor  proves 
dishonest.  It  is  between  the  owner  and  the  factor 
that  the  confidential  relation  exists,  not  between  the 
factor  and  the  pledgee,  who  is  a  third  person  in  regard 
to  the  agency.  Between  the  pledgee  and  the  factor 
there  is  no  confidential  relation  ;  the  former  reposes, 
or  need  repose,  no  confidence  in  the  factor.      He  may 


*  Soltau  vs.  Gerdau,  1U>  X.  Y.  :\97. 
t  Troplong,  lor.  cit. 


Pledge  hv  the  Factor  in  the  Civil  Law.         463 

not  know  that  he  is  deahng  with  a  factor,  for  the 
latter  exhibits  no  credentials.  If  the  pledgee  is  aware 
that  the  pledgeor  is  acting  in  the  capacity  of  a 
factor,  he  has  the  right  to  presume  that  the  lat- 
ter is  acting  within  the  limits  of  his  authority  and 
he  should  not  suffer  because  a  mandate  which  is 
not  submitted  to  him  has  been  violated.  As  stated  by 
Mr.  Rogron,  the  principal  by  eliminating  himself  and 
showing  the  factor  alone  to  the  world  as  possessor  of 
the  property,  has  renounced  all  claims  against  third 
persons;  and,  for  the  same  reason,  third  persons  have 
no  claims  against  the  principal  for  the  acts  of  his 
factor. 

The  owner  is  presumed  to  know  the  factor  to  whom 
he  confides  his  property  and  to  have  ascertained 
whether  or  not  that  agent  is  worthy  of  his  confidence. 
The  pledgee  and  the  factor  are  strangers  to  each  other 
and  meet  only  for  the  purpose  of  bargaining  in  a  com- 
mercial transaction.  The  owner  deals  with  one  factor 
alone.  The  pledgee  deals  with  any  number  of  factors. 
The  owner  looks  to  the  character  of  the  factor.  The 
pledgee  looks  to  the  quality  of  the  propertv. 

The  factor  commits  a  breach  of  trust  if  he  disposes 
fraudulently  of  the  property-  entrusted  to  him  and  may 
be  prosecuted  for  it.  He  commits  no  breach  of  trust 
in  deceiving  the  pledgee  by  transferring'to  him  prop- 
erty which  he  has   no  right  to  transfer. 

518.  And  now,  which  of  the  two  laws  is  more 
likel}'  to  obstruct  and  impede  commerce ;  the  one 
which    permits    commercial    inen    to  buy  commercial 


4G4:  The  Law  of  Pledge. 

propert}'  or  take  it  on  pledge,  with  safet\-  from  the 
parties  in  whose  hands  it  is  found,  and  who  ap- 
parently are  the  owners  of  it ;  or  the  one  which  ex- 
poses purchasers  to  danger  and  loss  if  they  deal  with 
parties  whom  they  do  not  know  with  absolute  cer- 
tainty to  be  the  true  owners  of  the  goods  which  they 
offer  for  sale  or  pledge,  or  the  duly  authorized  agents 
of  the  true  owners?  The  one  rule  naturally  creates 
confidence,  and  consequently  multiplies  commercial 
relations  and  business  transactions ;  the  other  rule,  as 
naturally,  is  bound  to  create  distrust,  and,  as  conse- 
quently, is  likely  to  restrict  commercial  and  financial 
operations.  We  believe  that,  both  as  a  principle  of 
justice  and  a  matter  of  public  interest,  the  Civil  law  is 
^superior  on  this  subject  to  the  Common  law. 


CHAPTER    XLIII. 

Liens   at    Common    Law   aiNd   Tacit    Pledges  of 
THE  Civil  Law. 

518.  These  two  subjects,  though  not  identical,  at 
least  present  many  points  of  analogy  and  even  of  affinity 
between  them.  In  both  of  them  the  creditor  has  a 
right  of  priority  and  preference  over  the  proceeds 
of  the  security,  and  this  right  rests  upon  his  posses- 
sion of  the  thing  pledged  or  affected  by  the  lien.  In 
both  of  them  the  pledge  or  the  lien  is  lost  if  the  cred- 
itor parts  with  that  possession.  In  neither  of  them 
the  creditor  has  any  right  in  the  thing,  or  to  the  thing, 
in  re  or  ad  rem.  In  neither  of  them  the  creditor  has 
any  right,  general  or  special,  of  property.  As  to  the 
tacit  pledge  of  the  Civil  law,  no  legal  title,  not  even 
a  special  or  qualified  property,  passes  to  the  pledgee, 
because  the  theory  or  doctrine  of  such  titles  is  un- 
known and  repulsive  to  the  Civil  law.  And  as  to  the 
liens  at  Common  law,  it  is  well  established  that  the 
general  title  which  passes  to  the  mortgagee,  and  possi- 
bly the  special  title,  which  passes  to  the  pledgee  when 
the  thing*  pledged  is  assigned  or  transferred  to  him  ; 
it  is  well  established,  we  say,  that  no  such  title,  and 
no  title  at  all,  passes  to  the  lien  creditor. 

519.  In  many  instances  the  same  thing  which,  at 
Civil  law,  is  termed  a  tacit  pledge,  at  Common  law 
is  called  a  lien,  such  as  the  right  of  priority  or   pref- 

465 


46C  The  Law  of  Pledge. 

erence  and  power  of  retention  given  by  the  law  to  a 
workman  over  the  article  w^hich  he  has  repaired,  for 
the  price  of  his  labor  ;  to  an  innkeeper  over  the  effects 
of  a  traveler  for  the  price  of  his  board  or  lodging  •  to 
the  lessor  over  the  furniture  or  chattels  of  the  lessee 
for  the  rent  5  to  the  factor  for  his  advances  over  the 
goods  of  his  principal ;  to  the  common  carrier  for 
his  freight  over  the  merchandise  which  he  carries,  and 
so  forth. 

Properl}'  speaking,  the  pledge  is  only  conventional 
or  contractual ;  it  is  a  contract  by  which  the  pledgeor 
puts  the  thing  pledged  in  the  hands  of  the  pledgee  to 
secure  an  indebtedness  according  to  certain  terms  and 
conditions  agreed  upon  between  them.  Under  the 
rules  of  the  Civil  law  this  contract,  except  in  the  case 
of  commercial  pledges,  must  be  clothed  with  some 
indispensable  formalities  and  evidenced  by  a  written 
act. 

520.  The  denomination  of  tacit  pledge,  therefore, 
to  designate  the  lien  or  right  of  preference  and  reten- 
tion of  the  credit  under  certain  circumstances,  is  hardly 
a  correct  one.  Still  less  so  is  the  term  statutory  pledge 
sometimes  used  by  the  courts  and  the  law  writers. 
The  law  permits  parties  to  contract  with  one  another, 
but  it  does  not  contract  for  them.  It  does  not  there- 
fore itself  -pledge  the  property  of  the  debtor  to  the 
creditor.  It  only  submits  it  to  the  power  of  the  latter, 
in  certain  cases  and  for  certain  purposes  ;  and  that  is 
precisely  what  constitutes  the  lien  at  Common  law. 

521.  The  -privileges  of   the  Civil  law  {privilegia 


IjIKNs  at  Common  Law.  -467 

of  the  Roman  law)  are  a  totally  different  thing, 
though  in  the  jurisprudence  and  the  practice  of 
Louisiana,  the  two  words — lien  and  privilege — are 
used  indifferently  to  mean  the  same  thing.  The 
-privileges  of  the  Civil  law  correspond  to  the  equitable 
liens  of  the  Common  law  to  a  certain  extent,  and 
differ  from  them  in  many  respects,  as  we  will  see 
later  on. 

522.  Mr,  Jones  says  that  there  may  be  a  statutory 
pledge  in  the  same  way  that  there  may  be  a  statutory 
mortgage,  and  he  illustrates  his  idea  in  the  following 
words  :  "  Thus  a  statute  which  provides  that  a  rail- 
road company,  which  is  to  receive  bonds  of  a  city  to 
aid  its  construction,  shall  issue  to  the  city  certificates 
of  stock  of  the  company  for  an  amount  equal  to  the 
amount  of  the  bonds  received,  and  that  the  stock 
should  remain  forever  pledged  for  the  redemption  of 
the  bonds,  creates  a  pledge  of  the  stock  to  the  city." 
And  he  cites  the  case  of  United  States  vs.  New  Or- 
leans, 98  U.  S.  381.* 

But  this  is  clearly  not  a  statutory  pledge.  The 
statute  in  that  case  authorized  the  city  of  New  Or- 
leans to  subscribe  to  the  capital  stock  of  the  railroad 
company,  and,  to  that  effect,  to  issue  its  bonds,  on 
condition  that  an  amount  of  stock  equal  to  the 
amount  of  bonds  issued  should  be  delivered  and 
pledged  by  the  company  to  the  city.  The  authoriza- 
tion to  issue  the  bonds  was  statutory,  but   the   pledge 

*  Jones,  on  Pledges,  Sec.  22. 


468  The  Law  of  Pledge. 

of  the  stock  was  conventional,  though  the  law  made 
it  a  condition  to  the  issuing  of  the  bonds. 

A  statute  authorizing  tlie  Governor  of  a  State  to 
issue  bonds  in  aid  of  a  bank,  and  providing  that  all 
the  mortgages  belonging  to  the  bank  should  consti- 
tute a  pledge  in  favor  of  the  State  and  of  the  bond- 
holders, to  secure  the  payment  of  the  bonds,  presents 
a  similar  instance  of  the  statutor}^  authorization  to 
issue  the  bonds  and  of  the  contractual  pledge  to  secure 
the  same.* 

523.  A  law  authorizing  a  married  woman,  under 
certain  circumstances  and  conditions,  to  borrow  money 
and  mortgage  her  property  to  secure  the  debt,  is  of  the 
same  kind.  The  authorization  to  borrow  is  statutory, 
but  the  mortgage  is  conventional. f 

In  fact,  I  doubt  that  there  is,  properly  speaking, 
such  a  thing  in  the  legislation  of  either  Civil  or  Com- 
mon law  countries,  as  s^a^u/ory  pledges.  If  the  pledge 
is  statutory  because  it  is  inade  under  a  statute  which 
permits  it,  the  same  may  be  said  of  all  pledges  in  the 
Civil  law,  as  they  arc  allowed  by  virtue  of  statutory 
provisions.  But  the  Roman  law  and  the  modern 
Civil  law  as  well  see  a  tacit  pledge  in  certain  contracts, 
as  inherent  in  the  same,  in  which  the  law  gives  to  the 
creditor  the  right  of  retefition  of  the  thing  over  which 
he  has  a  lien  and  of  which  he  has  the  possession.  The 
contracting  parties  in  such  cases  are  presumed  to  have 


*Forstall  vs.  Consolidated  Association,  34  La.  An.  770. 

Citizens  Bank  of  Louisiana  vs.  Cotton  Press  Co.,  7  La.  An.  2SG. 

Same  vs.  Heirs  of  Gray,  47  La.  An.  5f)L 
t  Civil  Code  of  Louisiana,  Arts.  12G.  127.  12S. 


Liens  at  CoMxMon  Law.  469 

tacitly  agreed  as  to  the  exiete-^ioe  of  the  pledge,  having 
contracted  under  a  law  which  gives  the  creditor  the 
right  of  retaining  possession  of  the  debtor's  property. 

524.  I  will,  for  the  understanding  of  this  subject, 
again  follow  Mr.  Troplong.  He  tells  us  that  the  Civil 
Code  provides  only  for  the  conventional  pledge  ;  but 
that  there  is  a  tacit  pledge  in  numerous  transactions. 
For  instance,  in  the  contract  of  lease.  The  fruits  of 
the  crop  and  the  furniture  and  in<6truments  of  hus- 
bandry in  the  rented  house  or  farm  are  a  tacit  pledge, 
inherent  in  the  contract  of  lease,  and  give  the  lessor 
the  right  to  be  paid  by  preference  from  the  proceeds  of 
those  things.  It  is  as  a  tacit  pledge  that  the  right  of 
the  landlord  is  considered  by  the  Roman  law.  And 
Troplong  cites  the  Digest :  "  Eo  jure  utiniur  ut  qucc 
in  -prcBdia  urbana  inducta  illata  sunt^  pignori  esse 
credantur,  quasi  id  tacite  convenerity  This  conclu- 
sion, he  adds,  is  natural.  The  things  in  question 
are  contained  in  the  leased  premises  ;  the  lessor,  there- 
fore, detains  them  in  some  sort  in  detaining  and  pos- 
sessing the  premises  which  contain  them.* 

525.  The  Civil  Code  of  Louisiana  provides  more 
explicitly  for  the  right  of  pledge  of  the  lessor  than  the 
Code  Napoleon,  and  under  the  terms  of  the  former 
the  pledge  can  hardly  be  said  to  be  merely  tacit. 

The  Code  of  Louisiana  enacts  on  that  subject  as 
follows  : 

Article  2705.  '' The  lessor  has  for  the  payment  of 
his  rent,  and  other  obligations  of  the  lease,  a   right  of 

*  Troplong,  Nantissement,  Sec.  40. 


470  The  Law  of  Pledge. 

pledge  on  the  movable  effects  of  the  lessee  which  are 
found  on  the  property  leased. 

"  In  the  case  of  predial  estates  this  right  embraces 
everything  that  serves  for  the  labor  of  the  farm,  the 
furniture  of  the  lessee's  house  and  the  fruits  produced 
during  the  lease  of  the  land  ;  and  in  the  case  of  houses 
and  other  edifices  it  includes  the  furniture  of  the  les- 
see and  the  merchandise  contained  in  the  house  or 
apartment,  if  it  be  a  store  or  shop, 

"  But  the  lessee  shall  be  entitled  to  retain  out  of 
the  property  subjected  by  law  to  the  lessor's  privilege, 
his  clothes  and  linen  and  those  of  his  wife  and  family, 
his  bed,  bedding  and  bedstead  and  those  of  his  wife 
and  family  ;  his  arms,  military  accoutrements,  and  the 
tools  and  instruments  necessary  for  the  exercise  of  the 
trade  or  profession  by  which  he  gains  his  living  and 
that  of  his  family." 

Article  2706.  "  This  right  of  pledge  includes  not 
only  the  effects  of  the  principal  lessee  or  tenant,  but 
those  of  the  under-tenant,  so  far  as  the  latter  is  in- 
debted to  the  principal  lessee  at  the  time  when  the 
proprietor  chooses  to  exercise  his  right.  A  payment 
made  in  anticipation  by  the  under-tenant  to  his  prin- 
cipal does  not  release    him  from  the  owner's  claim." 

Article  2707.  "•  This  right  of  pledge  affects  not  only 
the  movables  of  the  lessee  and  under-lessee,  but  also 
those  belonging  to  third  persons,  when  their  goods 
are  contained  in  the  house  or  store,  by  their  own  con- 
sent, express  or'implied"  * 


*  Publishing  Company  vs.  Piffet  et  als.,  34  La.  An.  602. 
Goodrich  vs.  Bodley,  35  La.  An,  52'). 


Liens  at  Common  Law.  471 

Article  2708.  "  Movables  are  not  subject  to  this 
right,  when  they  are  only  transiently  or  accidentally 
in  the  house,  store  or  shop,  such  as  the  baggage  of  a 
traveler  in  an  inn,  merchandise  sent  to  a  workman  to 
be  made  up  or  repaired,  and  effects  lodged  in  the 
store  of  an  auctioneer  to  be  sold." 

Article  2709.  "In  the  exercise  of  this  right  the 
lessor  may  seize  the  objects,  which  are  subject  to  it, 
before  the  lessee  takes  them  away,  or  within  fifteen 
days  after  they  are  taken  away,  if  they  continue  to  be 
the  property  of  the  lessee,  and  can  be  identified." 

And  Article  3218  provides  for  the  right  of  retention 
of  the  lessor.  "  The  right  which  the  lessor  has  over 
the  products  of  the  estate,  and  on  the  movables  which 
are  found  on  the  place  leased,  for  his  rent,  is  of  a 
higher  nature  than  a  mere  privilege.  The  latter  is 
only  enforced  on  the  price  arising  from  the  sale  of 
movables  to  which  it  applies.  It  does  not  enable  the 
creditor  to  take  or  keep  the  effects  themselves  specially. 
The  lessor,  on  the  contrary,  may  take  the  effects  them- 
selves and  retain  them  until  he  is  paid. 

This  right  of  the  lessor  to  take  the  effects  of  the 
lessee  and  retain  them  until  he  is  paid,  corresponds, 
in  a  certain  manner,  to  the  law  of  Distress  of  the  old 
Common  law  of  England  and  to  the  statutory  law  of 
some  of  the  States  of  the  Union  on  the  same  subject. 
Of  that  we  shall  see  more  further  on. 

526.  The  Code  Napoleon  does  not  contain  provi- 
sions similar  to  those  of  Louisiana,  and  it  treats  the 
lessor's  right  over  the  property  of  the  lessee  as  a  mere 


472  TiJF,  Law  of  Pledge. 

privilege  or  lien  ;  but  it  gives  the  lessor  the  power  to 
seize  the  property  of  the  lessee  for  rent  by  a  proceed- 
ing called  saisie-gagerie,  and  it  gives  him  also  the 
right  of  revendication  of  that  propert}-  within  a  cer- 
tain number  of  days,  that  is,  to  follow  it  in  the  hands 
of  third  persons  and  seize  it  there  when  the  lessor  has 
removed  it  from  the  leased  premises.'* 

527.  The  framers  of  the  Code  of  Louisiana  have 
evidently  taken  the  substance  of  the  articles  cited 
above,  except  the  exemption  of  the  tools  and  other 
effects,  from  Pothier,  the  source  of  legal  wisdom  and 
learning  from  which  they  principally  drew  their  pro- 
visions, when  they  departed  from  their  ordinary 
model,  the  Code  Napoleon.  But  we  must  observe 
that  Pothier,  who  preceded  the  Code  Napoleon  and 
adhered  more  closely  to  the  Roman  law  than  did  the 
framers  of  the  French  code,  calls  the  tacit  pledge  of 
the  landlord  over  the  lessee's  property  a  tacit  mort- 
gage, line  hypotheque  tacite.  Pothier  use*  this  term 
as  he  finds  it  in  the  Roman  law,  where  the  mortgage 
affected  personal  as  well  as  real  property.  Further- 
more, as  we  have  seen  before,  the  distinction  between 
the  pledge  and  the  mortgage  in  the  Roman  law  was 
often  ignored,  the  only  difference  being  in  fact  that 
the  pledgee  had  possession  of  the  property,  and  the 
mortgagee  had  not. 

We  find,  therefore,  from  the  Roman  law,  from 
Pothier,  from  Troplong,  that  the   right   of  priority  of 

*  Code  Napoleon,  Art.  2102. 


.  Liens  at  Common  Ijaw.  473 

the  lessor  over  the  lessee's  property  for  the  rent  arises 
from  a  tacit  or  implied  pledge.* 

528.  Let  us  observe,  on  the  lessor's  privilege,  a 
remarkable  difference  between  the  jurisprudence  of 
Louisiana  and  the  French  law,  from  which  it  is 
derived,  as  to  the  kind  of  property  of  the  lessee  upon 
which  the  privilege  rests.  Pothier  and  the  commen- 
tators of  the  Code  Napoleon  are  unanimously  of  the 
opinion  that  the  choses  in  action^  bills  and  promissory 
notes  which  are  found  on  the  leased  premises  are  not 
affected  by  the  lessor's  privilege. 

Pothier  says:  "  In  regard  to  promissory  notes  and 
obligations  which  are  found  in  the  house,  it  is  not 
doubtful  that  they  are  not  subject  to  the  pledge  of  the 
landlord,  for  they  are  only  evidences  of  credits  belong- 
ing to  the  lessee  ;  and  those  credits  being  incorporeal 
things  which,  by  their  nature  nullo  coiitinentur  loco^. 
it  can  not  be  said  that  xSx^y  furnish  the  house." f 

Pont  savs  in  the  same  manner:  ''Evidences  of 
credits  and  obligations,  being  incorporeal  things,  quce 
in  solo  jure  co7isisiunt,  reside,  in  reality,  in  no  place,, 
nulla  circu7nscribu?ihir  loco.  Hence  we  must  con- 
clude that  it  would  be  folly  to  consider  that  they 
furnish  the  leased  premises."! 

The  Court  of  Louisiana  has  decided  differently,  and 
held    that  promissory    notes,    bills    of  exchange    and 


*  Pothier.  Du  Louage,  p.  197. 
t  Pothier,  Dn  Lonage,  p.  203,  Xo.  45. 
X  Pont,  Des  Privileges,  1  Vol.,  p.  70. 
See  also:  Troplong,   Des  Privileges,!   Vol.    221.  222:  Laurent. 

Des  Privileges,  Vol.   29,  p.  448,  Xo.  413;  Aubry  etRati,  Vol. 

III.  p.  139,  Sec   261. 


474  The  Law  of  Pledge. 

choses  in  action  generally  were  part  of  the  movable 
effects  of  the  lessee  upon  which  the  privilege  and 
pledge  of  the  lessor  was  established  by  law.* 

I  think  that  we  may  say  of  those  decisions  of  the 
Court  of  Louisiana  what  Mr.  Bell  says  in  his  Com- 
mentaries, speaking  of  the  early  English  decisions  on 
the  right  of  factors'  right  to  pledge  their  principaFs 
property,  that  the}'  probably  had  their  origin  i?i  mis- 
take.^ 

529.  The  right  of  the  lessor  to  retain  or  detain  the 
property  of  the  lessee  until  the  rent  is  paid  being  con- 
sidered A  tacit  pledge,  and  yet  there  being  between 
the  parties  no  written  act  of  pledge,  as  required  by 
the  Civil  law,  it  is  well  to  see  what  Troplong  says  on 
this  point.  He  remarks  that  the  formalities  required 
bv  the  article  of  the  Napoleon  Code  (2074)  are  only 
indispensable  when  there  is  a  contract  of  pledge  en- 
tered into  as  a  principal  matter.  But  if  the  pledge 
is  only  the  necessarv  and  accessory  consequence  of 
another  contract,  which  includes  it  impliedly,  a  strict 
and  rigorous  application  of  Art.  2074  is  not  demanded. 
He  gives  as  an  example  the  contract  of  lease.  The 
right  of  pledge  that  the  lessor  has  on  the  property 
deposited  in  the  leased  premises  does  not  result  from 
the  principal  clauses  of  the  contract ;  it  is  implied  in 
the  lease.  Thus,  it  has  been  seen  that  the  landlord 
can  seize  the  goods  deposited  with  the  lessee,  even  by 


*  Succession  of  Stone,  31  La.  An.  311. 

Matthew  &  Finley  vs.  Their  Creditors,  10  La.  An.  718. 
t  Story,  Bailments,  325. 


Liens  at  Common  Law.  475 

virtue  of  a  verbal  lease.  And  the  same  thing  may  be 
said  of  a  workman  or  artisan  who  would  seize  the 
article  repaired  by  him,  of  the  factor  in  possession  of 
goods  which  he  holds  for  sale,  etc.  All  these  are  in 
the  same  position  when  they  have  in  their  hands  the 
property  of  their  debtor,  as  if  they  had  stipulated  a 
regular  pledge  of  it.* 

The  idea  of  a  tacit  pledge  is  expressed  also  by 
Cujacius  in  the  case  of  the  common  carrier  over  the 
goods  in  his  possession.  He  says:  ''''' Merces  -pro 
vectura  tacite  pigiioratce  sunt.''''  \ 

And  again,  as  to  the  law  of  Louisiana,  the 
rights  of  those  privileged  creditors  can  not  alto- 
gether be  said  to  arise  from  a  tacit  or  implied  pledge, 
because  their  privilege  is  declared  by  the  statute. 
Thus,  of  the  depositary  who  has  incurred  any  expenses 
for  the  preservation  of  the  thing  deposited,  it  is  said  : 
"  Against  the  owner  of  the  thing  his  right  is  in  the 
nature  of  that  of  pledge,  by  virtue  of  which  he  may  re- 
tain the  thing  until  the  expenses  which  he  has  incurred 
are  repaid.  He  possesses  this  qualified  right  of  pledge 
against  the  creditors  of  the  owner  if  they  seek  to  have 
the  thing  sold.  He  may  refuse  to  restore  it  unless 
they  either  refund  his  advance  or  give  him  security 
that  the  thing  shall  fetch  a  sufficient  price  for  that  pur- 
pose."J 

530.  For  the  innkeeper, the  law  of  the  same  State 
provides:     "Innkeepers    have    a    privilege,    or  more 


*  Troplong,  Des  Privileges,  Vol.  1,  p.  259. 
t  Troplong,  Du  Nantissement,  p.  42. 
X  Civil  Code  of  Louisiana,  Art.  3225. 


476  The  Law  of  Pledge. 

properly  a  right  of  pledge,  on  the  property-  of  travel- 
ers who  take  their  board  or  lodging  with  them,  by 
virtue  of  which  they  ma\-  retain  the  propert}-  and 
have  it  sold,  to  obtain  payment  of  what  such  travelers 
ma)'  sue  them  on  either  of  the  accounts  above  men- 
tioned.* 

531.  There  is  also  a  tacit  pledge  recognized  bv  the 
Civilians  as  resulting  in  favor  of  the  creditor  from  the 
judicial  seizure  of  the  property  of  the  debtor.  That 
seizure,  which  is  made  in  spite  of  the  debtor,  and  puts 
his  property  in  the  hands  of  justice,  for  account  of  the 
creditor,  operates  as  a  compulsory  pledge,  known  to 
the  Romans  as  the  pigiius  coactivum.  The  law, 
through  its  judicial  officers,  enters  the  premises  of  the 
debtor,  takes  possession  of  his  personal  property  for 
the  benefit  of  the  creditor,  and  after  dispossessing  the 
debtor,  constitutes  a  legal  pledge  of  it.  In  this,  the 
law  protects  both  the  creditor  and  the  debtor.  It 
takes  charge  of  the  rights  of  the  former,  and  it  saves 
the  latter  from  personal  violence  and  rigor. f 

This  tacit  pledge  and  privilege  of  the  seizing 
creditor  is  provided  for  by  the  legislation  of  Louis- 
iana, and  it  is  established  both  in  cases  of  seizure  in 
execution  of  judgments,  and  of  seizure  by  mesne 
process  of  attachment.  "  The  creditor,  by  the  mere 
act  of  seizure,  is  invested  with  a  privilege  on  the 
inovable  and  immovable  property   thus   seized,  which 


*  Civil  Code  of  Louisiana,  Art.  3233. 

Laws  of  1896,  Nos.  29,  35,  28. 
t  Troplong,  Du  Nantissement,  No.  -16. 


Liens  at  Common  Law.  477 

entitles  him  to  a  preference  over  other  creditors,  unless 
the  debtor  has  become  bankrupt  previous  to  the 
seizure,'''^ 

It  is  the  mere  act  of  seizure,  equally,  in  attachments 
which  creates  the  right  of  priorit}',  as  the  Court  has 
declared:  "  An  attachment  enables  the  creditor  to 
obtain  payment  out  of  the  property  attached  in  pref- 
erence to  others,  not  on  the  ground  that  he  has 
acquired  a  lien  upon  it,  but  because  he  has  first  used 
the  process  of  the  Court  to  seize  and  put  it  into  the 
possession  of  the  sheriff  for  the  purpose  of  obtaining 
his  payment.  The  law  and  the  courts  will  not,  there- 
fore, allow  other  ordinary  creditors  or  other  process  to 
interfere  with  him."'f 

532.  But  it  is  only  the  possession,  actual  and  cor- 
poreal, or  constructive  or  symbolical,  which  the  sheriff 
takes  of  the  debtor's  property,  which  gives  the  cred- 
itor the  right  of  preference,  that  possession  being  con- 
sidered as  the  tacit  compulsory  pledge,  the  pignus 
coactiviiiu.  Therefore,  when  the  attachment  is  dis- 
solved before  the  sale  of  the  property  seized  by  the 
bankruptcy  of  the  debtor,  or  for  some  other  reason, 
the  possession  of  the  sheriff  ceases,  the  compulsory 
pledge  is  defeated  and  the  creditor  loses  his  right  of 
preference.! 


*  Code  of  Practice,  Art.  722. 

t  Beck  &  Co.  vs.  Brady  et  al.,  G  I.a.  An.  445. 

X  Nelson  &  Co.  vs.  Simpson,  9  La.  An.  311. 

Hanna  vs.  Creditors,  12  I.a.  M.  32. 

Edson  vs.  Freret,  11  La.  An.  710. 

Stockton  vs.  Hyde,  5  La.  An.  3U0. 

Tiia  vs.  Carrierc,  117  U.  S.  201. 

Peck  v«.  .Fcnness.  7  How.  (U.  S.)  012. 


CHAPTER  XLIV. 

533.  The  same  right  of  preference  of  the  seizing 
creditor  arising  from  the  fact  of  the  seizure  itself,  and 
which  the  CiviHans  call  a  tacit  pledge,  exists  in  the 
same  manner  in  the  Common  law  as  a  lien  at  law, 
with  the  same  advantages  and  under  the  same  condi- 
tions. As  the  pignus  coaciivum,  this  lien  at  law 
springs  into  existence  by  the  possession  of  the  sheriff 
or  other  executive  officer  of  the  court,  and  goes  out  of 
existence  if  that  possession  ceases  before  the  sale  of 
the  property  seized.  By  statute  in  some  States  the 
mere  putting  of  the  writ  of  seizure  into  the  hands  of 
the  sheriff  amounts  to  a  constructive  possession  of  the 
debtor's  property  and  operates  as  the  question  at  law 
in  question. 

The  seizure  creates  the  lien,  whether  it  is  in  execu- 
tion of  judgments  or  by  mesne  process  of  attachment.* 

In  Louisiana  and  other  Civil  law  countries  the 
seizure  of  credits  is  only  effected  by  the  notice  given 
by  the  sheriff  to  the  debtor  of  the  credit,  not  to  the 
debtor  or  defendant  in  the  suit.  It  is  this  notice 
to  the  debtor  of  the  credit  which  constitutes  the  con- 
structive possession  of  the  credit,  f 


*  Poche  vs.  James,  7  How.  612. 

Waller  vs.  Best,  3  How.  111. 

Kiltridge  vs.  Warren,  14  N.  Uamp.  .509. 

Arnold  vs.  Brown,  24  Pick.  95. 

Drake,  on  Atiachment,  Sec.  224. 
t  Ante:   Sec.  11  ct  seq. 


480  The  Law  op  1*ledge. 

In  the  United  States  and  in  England  the  seiz- 
ure is  effected  as  a  transfer  or  assignment  of  the  credit 
would  be,  without  such  notice.  * 

534  This  doctrine  or  theory  of  the  tacit  pledge  is 
the  product  of  the  philosophy  and  ingenuity  of  the 
Roman  jurists.  It  is  unknown  to  the  Common  law, 
at  least  under  that  name.  But  the  same  principles 
and  rules  which  govern  it  are  to  be  found  in  the  liens 
at  law  of  the  American  and  English  jurisprudence. 

In  the  lien  at  law,  as  in  the  tacit  pledge,  the  prop- 
erty upon  which  it  bears  must  be  in  the  possession  of 
the  creditor ;  but  it  is  not  the  fact  of  possession  which 
creates  the  right  of  preference,  though  the  right  is 
inseparable  from  possession.  That  right  arises  from 
the  nature  of  the  creditor's  claim  and  is  created  b}'  or 
under  the  law.  The  fact  of  possession  supports,  viv- 
ifies and  preserves  the  right,  and  is  a  condition  prece- 
dent of  its  ver}^  existence.  Thus  it  is  the  law  that 
gives  the  lien,  or  right  of  preference,  to  the  lessor, 
the  artisan,  the  innkeeper,  the  common  carrier,  etc.  ; 
but  it  is  possession  that  makes  the  lien  available. 
Without  possession  the  preference  would  not  exist ; 
but  possession  itself,  where  the  law,  or  the  parties 
under  the  law,  have  created  no  lien,  would  be  no 
cause  of  preference. 

The  lien  is  a  right  over  the  property,  when  it  is  in 
the  hands  of  the  creditor.  It  is  not  a  ris^ht  in  the 
thing  or  to  it,  in  re  or  ad  rem,  as  we  said  before.  It 
is  not  inherent  in  it  in   any    manner,  as   in    the   mort- 

*  Ante:    Sec.  19  et  seq. 


Liens  at  Common  Law.  481 

gage.  And  when  we  say  that  it  is  a  right  over  the 
property  we  mean  over  the  proceeds  of  it  when  it  is 
sold  and  the  price  reahzed.  The  word  lie^i  expresses 
clearly  what  it  is,  and  it  is  remarkable  that  the  law 
writers  have  not  thought  proper  to  give  the  origin  of 
it.  The  term  is  taken  from  the  French  word  lien^ 
which  means  a  tie^  that  which  attaches  something  to 
something  else.  The  lien,  in  law,  is  the  tie  which 
attaches  the  property  to  the  claim  of  the  creditor,  or 
the  claim  to  the  property. 

535.  At  the  same  time  that  we  assimilate  the  lien  at 
law  with  the  tacit  pledge,  we  should  bear  in  mind  that 
the  latter  is  one  of  the  fewer  privileges  of  the  Civil 
law  depending  upon  possession,  but  that  generally  the 
privileges  of  the  Civil  law  are  not  accompanied  by  pos- 
session, and  have  been  created  by  the  Roman  law  for 
the  very  purpose  of  securing  the  creditor  without 
depriving  the  debtor  of  his  propert}',  at  least  until  the 
debt  becomes  executory  and  the  property  is  seized  and 
sold  to  satisf}'  the  debt.  It  is  one  of  the  charac- 
teristics of  the  Civil  law  privileges,  when  possession  is 
not  necessary  to  their  existence,  that  they  follow  the 
property  into  the  hands  of  third  persons,  like  the  mort- 
gage, and  it  is  that  which  makes  them  effective  as  a 
means  of  preference  over  other  or  ordinary  creditors. 

536.  There  is  also  this  difference  between  the  liens 
at  law  of  the  Common  law  and  the  tacit  pledges  of  the 
Civil  law,  that,  though  they  produce  the  same  effects, 
and  both  necessitate  the  creditor's  possession  of 
the   debtor's    property,  the  sources  of  their  existence 


482  The  Law  of  Pledge. 

are  not  the  same.  The  tacit  pledges  result  from  priv- 
ileges established  in  favor  of  the  creditors.  Now,  the 
privileges  of  the  Civil  law  are  all  created  by  statute, 
and  they  are  of  stricti  juris.  They  can  not  arise  from 
contract,  or  from  usage  or  custom,  or  by  implication 
of  law.  There  are,  therefore,  no  privileges  at  Common 
law  in  the  Civil  law  countries.  Whether  thev  exist 
with  or  without  the  creditor's  possession  of  the  prop- 
erty they  are  the  creatures  of  statutory  law.  The  con- 
tracting parties  have  no  power  to  grant,  on  one  side, 
and  to  accept,  on  the  other,  a  privilege  on  the  prop- 
erty of  the  debtor  in  favor  of  the  creditor,  as  is  done  in 
case  of  a  mortgage.  Any  stipulation  of  that  sort  is 
absolutely  nugatory  and  produces  no  legal  effect  what- 
ever. The  Civil  Code  of  Louisiana  states  the  rule  in 
these  words  :  "  Privilege  can  be  claimed  only  for  those 
debts  to  which  it  is  expresslv  granted  in  this  Code.'"'^ 

In  his  work  on  Privileges  and  Mortgages,  Mr.  Pont, 
the  continuator  of  Marcade',  the  celebrated  commen- 
tator of  the  Code  Napoleon,  expounds  the  law  on  this 
subject  as  follows:  ''  We  must  even  say,  again  with 
Domat,  that,  if  the  debt  is  not  by  itself  privileged, 
it  can  not  be  rendered  such  by  means  of  an  agree- 
ment. The  Court  of  Cassation  has  precisely  decided 
in  this  sense  that  all  privileges    must    be    restricted  to 


Civil  Code  of  Louisiana,  Art.  318.^. 
Succession  of  Rousseau,  23  La.  An.  3. 
Hoss  ei  al.  vs.  Williams,  24  La.  An.  5G8. 
Gause  vs.  Bullard,  16  La.  An.  107. 
Citizens  Bank  vs.  Maureau,  37  La.  An.  8.57, 
State  vs.  Bank,  33  La.  An.  70.5. 


Liens  at  Common  Law.  483 

the   cases   expressly    specified  in   the    statutes    which 
have  established  them."* 

537.  The  Hens  at  law,  on  the  contrary,  in  the  sys- 
tem of  the  Common  law  of  England  and  of  the  States 
of  the  Union,  excepting  Louisiana,  are  formed  by,  or 
arise  from,  either  a  stipulation  or  contract  between 
the  creditor  and  debtor,  or  usage  or  custom  of  trade, 
or  implication  of  law,  orstatute.  And,  in  case  of  specific 
or  particular  liens,  which  means  liens  on  a  particu- 
lar piece  of  property  to  secure  a  particular  debt,  thev 
are  liberally  construed  in  favor  of  the  creditor.  The 
personal  liens,  on  the  contrary,  founded  on  custom  to 
satisfy  a  general  balance  of  accounts,  are  not  favored, 
and  are  looked  at  with  jealousy  and  strictly  construed. f 

538.  But,  although  springing  from  different 
sources,  the  liens  at  law  and  the  tacit  pledges  have 
analogous  purposes  and  effects  and  cover  the  same 
classes  of  claims.  For  instance,  the  workman  or 
artisan  has  the  same  right  under  the  Civil  law  and 
the  Common  law  to  detain  in  his  hands  until  his 
claim  is  satisfied  the  property  of  the  debtor  that  he 
has  repaired,  or  improved,  or  constructed.  This 
right  is  founded  in  the  Common  law  upon  the  lien  at 
law,  whether  established  by  agreement,  custom  or 
statute;   and  it  is   founded  in  the   Civil  law  upon   the 


*  Pont,  Des  Privileges,  Vol.  I.  p.  17. 

Court  of  Cassation,    18th  Mav,    1831;  ]2lb   December,    1831;  3d 
August,  1837. 
t  Kent,  Comm.,  Vol.  2,  pp.  634,  635,  63G,  637. 

Am.  and  Eng.  Ency.  of  Law.  Vol.  13.  p.  r)76. 


484  The  Law  of  Pledge. 

tacit  pledge  and  privilege  exclusively  created  by 
statute.  * 

The  same  thing  may  be  said  of  the  liens  at  law 
and  tacit  pledges,  with  power  of  retention,  which 
secures  the  rights  of  the  innkeeper  for  boarding  and 
lodging  on  the  effects  of  travelers  ;  of  the  factors  for 
advances  on  the  goods  or  funds  of  their  principals  in 
their  hands  ;  of  the  common  carriers  for  their  freight 
on  the  merchandise  in  their  possession  ;  of  the  attor- 
neys at  law  on  the  amount  recovered  for  their  clients  ; 
of  the  lessor  for  his  rent  on  the  property  of  the  lessee 
placed  on  the  leased  premises. 

The  purposes,  the  instrumentalities  and  the  effects 
of  the  Common  law  and  the  Civil  law  in  all  such 
cases  are  the  same.  The  purpose  is  to  specially  pro- 
tect the  creditor ;  the  instrumentality  is  the  power 
given  to  him  to  retain  the  property  of  the  debtor  until 
he  is  paid  ;  the  effect  is  the  security  of  his  debt  thereby 
obtained  by  him. 

539.  In  both  systems  of  the  Common  law  and  the 
Civil  law,  the  lessor's  right  of  possession  and  detention 
of  the  lessee's  property  for  the  security  of  the  rent  is 
highly  protected,  and  harsh  means  of  obtaining  pay- 
ment are  put  in  the  hands  of  the  creditor.  But  those 
means  differ  in  their  mode  of   execution,  though  they 


Story,  Bailments,  Sec.  440. 

Kent,  Comin.,  Vol.  2,  p.  634. 

Am.  and  Enoj.  Ency.  of  Law,  Vol.  13,  p.  590. 

Civil  Code  of  Louisiana,  Art.  3217,  Xo.  2. 

Pothier,  Procedure  Civile,  p.  197. 

Troplong,  Des  Privileges,  Vol.  — ,  Nos.  170.  177. 

Gayarre  vs.  Tunnard,  0  La.  An.  254. 

Fields  vs.  Creditors,  11  La.  An.  545. 


Liens  at  Common  Law.  485 

are  analogous  in  substance.  B}-  the  Common  law  of 
Distress,  the  landlord  has  the  right  on  default  of  pay- 
ment of  rent  to  enter  the  leased  premises  and  take 
hold  of  whatever  property  is  distrainable.  He  may 
act  in  person  or  by  an  agent,  and  in  either  case  he  has 
the  sanction  of  the  law,  but  not  the  official  aid  of  the 
courts,  if  he  does  not  seek  it.  If  he  employs  a  con- 
stable to  act  for  him,  the  latter  is  his  private  agent,  but 
not  the  officer  of  the  court.  After  the  required  notices 
and  formalities,  the  distrained  property  is  sold  without 
order  or  decree  of  court.  It  may  be  said  that  the  law 
in  that  case  .allows  the  lessor  to  take  the  law  in  his 
own  hands  to  a  certain  extent.  It  is  true  that  in  sev- 
eral States  the  Common  law  of  Distress  has  been  con- 
siderably amended  and  restricted,  if  not  altogether 
abolished.  It  has  become  in  a  great  measure  unpop- 
ular in  this  country,  as  giving  the  landlord  an  undue 
advantage  over  the  other  creditors  of  the  lessee,  and 
enabling  him  to  act  with  too  much  severity  against  the 
latter.  In  some  States  the  mesne  process  of  attach- 
ment lias  been  substituted  to  the  power  of  Distress  of 
the  Common  law,  thereby  placing  the  rights  of  both 
the  lessor  and  the  lessee  in  the  hands  of  justice.* 

540.  Under  the  Civil  law,  the  right  of  retention  of 
the  lessee's  property  by  the  lessor,  for  the  payment  of 
rent,  does  not  go  the  extent  of  enabling  or  allowing 
him  to  enter,  in  person  or  through  an  agent,  on  the 
leased    premises,  vl  ei   anuls,   and   take   hold  of  the 


Am.  and  En<r.  Ency.  of  Law,  Vol.  5,  pp.  50G  ct  sei/. 
Bouvier,  Law  Dictionary,  verba  Distress. 


486  The  Law  of  Pledge. 

things  upon  which  his  privilege  bears,  and  sell  them 
without  an  order  or  decree  of  court.  He  must  invoke 
the  aid  of  the  law  for  that  purpose,  and  act  through 
its  officers.  When  the  Code  Napoleon  says  that  the 
lessor  can  seize  the  property  of  the  lessee  for  rent  it 
means  that  he  caii  cause  if  to  be  seized  hy  a  judicial 
proceeding.  And  when  the  Civil  Code  of  Louisiana 
sa3's  that  the  lessor  may  take  the  ejects  of  the  lessee 
and  retaiii  them  untit  he  is  paid,  it  means  that 
he  can  have  them  seized  and  taken  hold  of  for  his 
account  b}'  the  sheriff  or  other  officer  of  the  court. 
Neither  article  of  either  Code  would  be  a  leg^al  war- 
rant  or  authority  for  the  lessor  to  take  the  law  into  his 
own  hands  against  a  defaulting  lessee,  and  enter  his 
premises  and  take,  in  person,  possession  of  his  prop- 
erty. The  right  of  taking  and  retaining  the  effects  of 
the  lessee  is  clearh'  a  ris^ht  to  be  exercised  throu2fh  the 
ininistrv  of  justice. 

541.  In  Louisiana  the  lessor  causes  the  property  of 
the  lessee  upon  which  he  has  the  privilege  for  his 
rent,  to  be  seized  by  means  of  the  writ  of  provisional 
seizure,  for  which  the  Code  of  Practice  provides  spe- 
cifically as  follows  :  ''When  a  lessor  sues  for  rent, 
whether  the  same  be  due  or  not,  he  may  obtain  the 
provisional  seizure  of  such  furniture  or  property  as 
may  be  found  in  the  house  or  attached  to  the  land 
leased  by  him;  and  in  all  cases  it  shall  be  sufficient 
to  entitle  a  lessor  to  said  writ  to  swear  to  the  amount 
which  he  claims,  whether  due  or  not  due,  and  that  he 
has     good     reasons    to   believe  that  said    lessee    will 


Liens  at  Common  Law.  487 

remove  tlie  furniture  or  property  on  which  he  has  a 
lien  or  privilege,  out  of  the  premises,  and  that  he  maj' 
be  thereby  deprived  of  his  lien  ;  provided,  that  in  case 
the  rent  be  paid  when  it  falls  due  the  costs  of  seizure 
shall  be  paid  by  the  lessor,  unless  he  prove  that  the 
lessee  did  actually  remove,  or  attempt  or  intend  to 
remove,  the  property  out  of  the  premises  ;  provided, 
that  in  all  cases  of  provisional  seizure  of  furniture  or 
other  property  at  the  instance  of  lessors,  the  lessee 
shall  be  permitted  to  have  the  seizure  released  upon 
executing  a  forthcoming  bond  or  obligation,  with  a 
good,  solvent  security  for  the  value  of  the  property  to 
be  left  in  his  possession,  or  for  the  amount  of  the 
claim,  with  interest  and  costs  5  provided,  further,  that 
the  value  of  the  propert}'  shall  be  fixed  by  the  sheriff 
or  one  of  his  deputies,  with  the  assistance  of  two 
appraisers  selected  by  the  parties,  twenty-four  hours' 
notice  being  previously  given  to  the  lessor  or  his 
counsel  to  select  an  appraiser."* 

The  provisions  of  this  law  show  clearly  that  the 
landlord  can  not  himself  and  without  the  aid  of  jus- 
tice take  hold  of  the  property  of  the  lessee.  Further- 
more, it  has  been  several  times  decided  that  the  right 
of  the  lessor  to  retain  the  effects  upon  which  he  has 
his  lien  until  his  rent  is  -paid^  is  only  good  against 
the  lessee,  but  can  not  avail  the  lessor  against  third 
persons,  f 

The  Court  of   Louisiana  has,  however,  said  on  sev- 


*  Code  of  Practice  of  Louisiana,  Art.  287. 
t  Case  vs.  Kloppenburg,  27  La.  An.  482. 
Pickens  vs.  Sheriff,  31  La.  An.  870. 


488  The  Law  of  Pledge. 

eral  occasions  that  the  hmdlord  had  the  right,  in  the 
very  words  of  the  law,  to  tale  and  retain  the  lessee's 
property  ;  but  the  fact  of  actual  and  forcible  taking 
of  possession  b}-  the  landlord  himself  without  legal 
proceedings  was  not  a  factor  in  those  cases.  * 

It  has  been  decided,  under  this  law,  by  the  Court 
of  Louisiana,  that  the  mere  fact  that  the  lessee  was  in 
default  of  paj-ment  of  the  rent  was  a  sufficient  cause 
or  reason  for  the  lessor-  to  swear,  for  the  purpose  of 
the  seizure,  that  he  had  good  reasons  to  believe  that 
the  lessee  will  remove  his  property  from  the  leased 
premises  and  defeat  the  privilege  or  lien,  r 

542.  But,  as  we  have  seen,  the  law  of  that  State 
exempts  from  even  the  lessor's  lien  the  lessee's  clothes 
and  linen,  and  those  of  his  wife  and  family,  his  bed, 
bedding  and  bedstead,  and  those  of  his  wife  and  family  ; 
his  arms,  military  accoutrements  and  the  tools  and 
instruments  necessary  for  the  exercise  of  his  trade  or 
profession  by  which  he  gains  his  living  and  that  of  his 
family.  \ 

It  is  to  be  noted  that  the  exemptions  from  seizure 
for  debt  other  than  the  rent  under  the  lessor's  lien  are 
carried  still  further  by  the  later  law  of  Louisiana,  and 
carried  to  an  extent  which  borders  on  the  ridiculous  if 
not  on  injustice.  By  an  act  of  Its  Legislature,  1876, 
amending  the  Code  of  Practice,    it  Is  provided    that: 


*  Cooper  vs.  Capel,  29  La.  An.  213. 

Arick  vs.  Walsh,  23  La.  An.  605. 

Robb  vs.  Wagner,  5  La.  An.  112. 
t  Dillon  vs.  Poirier,  34  La.  An.  1100. 

Schiff  vs.  Ezekiel,  23  La.  An.  383. 

Lalaurie  vs.  Woods,  8  La.  An.  36G. 
;  Civil  Code  of  Louisiana.  Art.  2705. 


Liens  at  Common  Law.  489 

"  The  sheriff  or  constable  can  not  seize  the  Hnen  and 
clothes  belonging  to  the  debtor  or  his  wife,  nor  his  bed, 
bedding  or  bedstead,  nor  those  of  his  family,  nor  his 
arms  and  military  accoutrements,  nor  the  tools  and 
instruments  and  books  and  sewing  machines  necessary 
for  the  exercise  of  his  or  her  calling,  trade  or  profes- 
sion by  which  he  or  she  makes  a  living ;  nor  shall  he 
in  any  case  seize  the  rights  of  personal  servitude,  of 
use  and  habitation,  of  usufruct  to  the  estate  of  a  minor 
child,  nor  the  income  of  dotal  property^  nor  money 
due  for  the  salary  of  an  officer,  nor  laborers'  w^ages, 
nor  the  cooking  stove  and  utensils  of  said  stove,  nor 
the  plates,  dishes,  knives  and  forks  and  spoons,  nor 
the  dining  table  and  dining  chairs,  nor  wash  tubs,  nor 
smoothing  irons  and  ironing  furnaces,  nor  family  por- 
traits belonging  to  the  debtor,  nor  the  musical  instru- 
ments played  on  or  -practiced  071  by  any  mendyer  of  the 
family  y 

And  it  took  a  decision  of  the  Supreme  Court  of  the 
State  to  say  that  the  act  of  1876  did  not  apply  to  the 
lessor's  lien.  "^ 

Between  the  humane  law  which  saves  the  clothes 
and  bed  of  the  poor  debtor  and  his  tools  from  the 
reach  of  a  grasping  creditor,  and  the  communistic 
enactment  which  guards  his  musical  instruments, 
possibly  of  great  value,  against  seizure  for  an  honest 
debt,  there  is  a  wide  margin.  Such  principles,  if 
they  are  principles,  do  not  do  honor  to  American 
legislation. 

*  Stewart  vs.  Lacombe,  30  La.  An.  350. 


490  The  Law  of  Pledge. 

In  most  of  the  States  the  law  exempts  from  distre-s 
certain  chattels  of  the  lessee,  such  as  his  tools,  some 
instruments  of  husbandry,  cattle  of  a  certain  denomi- 
nation and  used  for  certain  purposes,  all  of  which  are 
necessary  for  the  liveHhood  of  the  lessee  and  his  fam- 
ily.* 

We  have  seen  before,  that  exemptions  of  the  same 
kind  from  seizure  were  provided  for  by  the  Roman 
law  and  the  early  laws  of  France,  f 

The  present  French  Code  of  Procedure  contains 
also  provisions  of  the  same  nature,  t 


*  Am.  and  Eng.  Ency.  of  Law,  Vol.  5,  p.  709. 

■t  Ante,  p.  2. 

i  Code  de  Procedure  Civile,  Art.  592. 


CHAPTER    XLV. 

EqlTITABLE    LlKNS    OF    THE     COMMON    LaW. 
PRIVir.EGES    OF   THE    CiVII.    LaW. 

543.  We  have  seen  the  great  analogy  between  the 
liens  at  Common  law  and  the  tacit  pledges  of  the 
Civil  law.  We  propose  now  to  look  into  the  double 
subject  of  the  Equitable  liens  of  the  Common  law  and 
the  Privileges  of  the  Civil  law.  There  are  between 
the  two  subjects  some  points  of  great  similarity  and 
others  of  fundamental  difference. 

The  first  point  of  similarity  is  that,  in  either  case, 
the  creditor  has  neither  possession  nor  any  right  of 
propertv,  but  onlv  a  right  of  ])reference  over  the 
property,  or  rather  the  proceeds  of  the  debtor's  prop- 
erty. But,  as  in  the  case  of  the  mortgage,  this  right 
of  preference  attaches  itself  to  the  propertv  and  fol- 
lows it  into  the  hands  of  third  persons  :  hence  the 
means  of  rendering  the  preference  effective.  When, 
in  two  different  systems  of  law,  governing  different 
countries,  we  find  the  creditor,  in  analogous  cases, 
given  the  same  preference  and  the  same  means  of 
effecting  that  preference  over  other  creditors  of  the 
same  debtor,  the  similarity  necessarily  strikes  us  and 
we  are  disposed  to  conclude  that  the  two  systems  in 
that  respect,  at  least,  must  have  a  common  origin. 
Although  the  principles  of  right,  justice  and  morality 
are    the    same    everywhere,    rules    of  law  which    are 

<91 


492  The  Law  of  Pledge. 

merely  arbitrary  do  not  frequently  coincide  in  differ- 
ent countries.  The  Equitable  Liens  of  the  Common 
law  of  England  have  their  source  in  the  Roman  law, 
so  far,  at  least,  as  their  fundamental  principles  are 
concerned. 

544.  In  his  learned  explanation  of  the  Equitable 
Liens,  Mr.  Pomeroy,  who  seems  to  have  expounded 
this  subject  more  fully  and  more  clearly  than  any  oi 
the  previous  writers,  says  in  a  note  which  we  take 
pleasure  in  transcribing  here,  and  which  should  have 
occupied  a  more  conspicuous  position  in  his  work  : 

"  The  equitable  lien  is  strictly  analogous  to  and  is 
undoubtedly  derived  from  the  hypotheca  of  the  Roman 
law.  Ilypotheca  was  the  right  given  to  a  creditor  over  a 
thing  belonging  to  another,  in  order  to  secure  the  pav- 
ment  of  a  debt  while  the  propertv  and  possession 
remained  in  the  debtor.  It  was  thus  distinguished 
from  pignus^  in  which  the  possession  w^as  delivered  to 
the  creditor,  and  he  thus  acquired  a  special  property. 
Hypotheca  was  generally  created  by  agreement,  ex- 
pressed or  implied,  between  the  parties  ;  but  in  some 
cases  it  was  created  by  operation  of  law,  and  then 
called  hypotheca  tacita,  as  over  the  ]iroperty  of  a  tutor 
in  favor  of  his  ward  and  in  favor  of  a  ^^'ife  over  her 
dowry  in  the  hands  of  the  husband.'"" 

545.  The  Equitable  Liens  of  the  Common  law  are. 
indeed,  derived  from  the  Roman  law,  as  most  of  the 
equity  jurisprudence  of  England  comes  from  the  Civil 
law.     We  may  go  still  farther    and    repeat  the  words 


Pomeroy,  Equity  Jurisprudence.  Vol.  3,  p.  230,  note  3. 


Equitabi.e  Liens  of  the  Common  Law.  493 

of  Sir  William  Jones,  one  of  England's  great  law- 
yers :  "With  all  its  imperfections,  the  Digest  is  a 
most  valuable  mine  of  judicial  knowledge.  It  gives 
law  at  this  hour  to  the  greatest  part  of  Europe,  and, 
though  few  English  lawyers  dare  make  such  an  ac- 
knowledgment, it  is  the  true  source  of  nearly  all  our 
English  laws  that  are  not  of  feudal  origin.'""^ 

546.  England  took  from  the  hypotheca  of  the 
Romans  the  principles  of  its  Equitable  Liens,  as  the 
Romans  themselves  took  the  hypotheca  from  the 
Greeks,  because  it  was  the  only  mode  of  security  then 
known  between  debtors  and  creditors  by  which  both 
the  title  or  ownership  and  the  possession  remained 
with  the  debtor.  The  hypotheca^  or  mortgage  of  the 
Civil  law,  by  which  name  it  was  adopted  in  Rome 
and  is  still  known,  and  in  force  in  the  modern  coun- 
tries of  Latin  origin,  did  not  deprive  the  debtor  of 
either  the  full  ownership  or  the  possession  of  his 
property. 

The  Romans  had,  at  first,  only  two  modes  of  real 
security ;  the  pledge,  pig7ius^  which  left  the  owner- 
ship with  the  debtor,  but  transferred  the  possession  to 
the  creditor ;  and  the  fiducia^  which  transferred  both 
the  ownership  and  possession  to  the  creditor,  but  with 
the  juridical  and  binding  promise  of  the  latter  to 
reconvey  and  retransfer  both  ownership  and  possession 
to  the  debtor,  on  payment  of  the  debt.  In  some 
cases,  the   creditor  would   leave  the  possession  of  the 

*  Irving,  Civil  Law,  p,  9G. 


494  The  Law  of  Pledge. 

property  with  the  debtor  by  agreement  to  that  effect* 
The  jiducia  which,  historically,  belongs  to  the  legal 
antiquities  of  Rome,  and  which  the  compilations  of 
Justinian  swept  away  altogether,  bore  a  remarkable 
resemblance  to  the  mortgage  of  the  Common  law. 
with  its  equity  of  redemption. 

The  transfer  of  both  the  title  and  the  possession  to 
the  creditor  w^as,  in  many  ways,  unnecessarily  injur- 
ious to  the  debtor.  The  properly  being  in  the  hands 
of  the  creditor  only  temporarily  and  conditionally,  did 
not  receive  from  him  the  care  and  fruitful  manage- 
ment and  improvement  which  the  owner  would 
bestow  upon  it  himself.  The  debtor  was  also  de- 
prived of  the  use  and  enjoyment  of  his  property,  and 
sometimes  of  the  means  of  obtaining  additional  credit 
from  it.  The  Greeks  had,  by  means  of  the  hypotheca^ 
resolved  the  question  of  giving  to  the  creditor  all  the 
desired  security  by  putting  upon  tlie  debtor's  property 
a  right  in  favor  of  the  creditor  which  attached  to  it  and 
followed  it  into  the  hands  of  third  persons,  without  de- 
priving the  debtor  of  its  use  and  enjoyment.  This  sys- 
tem was  so  superior  to  the  -pigtms  and  \\\^  Jiihicia  that 
the  Romans  adopted  it.  The  pigniis  was  the  spon- 
taneous production  of  natural  law.  The  Jiducia  was 
the  creature  of  the  formular  and  sacramental  Civil 
law.  The  hypotheca  was  neither,  and  came  to  Rome 
as  an  institution  of  foreign  extraction.  It  fell,  there- 
fore, under  the  authority  and  the  protection  of  the 
praetor,  and  became  an  important  branch  of  the  prse- 


Equitable  Liens  of  the  Common  Law.  495 

torian  law,  to  which  the  equity  system  of  England 
corresponds  and   from  which  it  drew  largely.  * 

547.  The  equitable  liens  of  the  Common  law  pro- 
duce the  same  effects  as  the  h3-pothecation  of  specific 
property  resulting  from  contracts  express  or  implied. 
Thev  are  intended  to  secure  the  creditor  by  giving 
him  a  right  of  preference  over  the  proceeds  of  the 
debtor's  property,  which  attaches  itself  to  the  property 
and  follows  it  into  the  hands  of  third  persons  ;  that 
is  to  say,  that  subsequent  transferees  or  assignees 
with  notice  of  the  lien  take  the  property  subject  to 
the  claim  of  the  creditor.  But  the  possession  must 
remain  with  the  debtor.  If  the  possession  is  trans- 
ferred to  the  creditor,  there  is,  or  may  be,  a  lien  at 
law,  but  no  equitable  lien.  The  debtor,  by  agree- 
ment, express  or  implied,  must  have  intended  that  the 
creditor  should  be  secured  by  the  equitable  lien  ;  and 
the  lien  must  have  been  intended  to  bear  upon  some 
particidar  property. 

The  mere  promise  of  the  debtor  to  secure  the 
creditor  by  mortgage  or  pledge  of  some  specific  prop- 
ert}',  will  not  of  itself  create  the  mortgage  or  pledge; 
but,  if  the  promise  is  not  fulfilled,  it  will  gi\'e  rise  to 
an  equitable  lien  on  the  property,  and  entitle  the 
creditor  to  be  paid  out  of  its  proceeds,  by  preference 
over  other  creditors,  as  if  the  debtor  had,  in  reality, 
granted  the  mortgage  or  the  pledge.  This  is  of  the 
very  essence  of  the  doctrine  of  equitable  liens,  as  the 


Troplong,  Dcs  ll5'pothL'(iues,  Vol.  1.  pp.  G  <'l  seq. 
Troplong,  Dii  XaQtisgement,  pp.  0  at  seq. 


496  The  Ijaw  op  Pledge. 

i7itention  of  the  debtor  to  secure  tlie  creditor  by  a 
charge  or  encumbrance  upon  some  particular  property 
enters  largely  into  that  doctrine. 

In  the  transaction  from  which  the  equitable  lien 
arises,  the  form  of  the  contract,  whether  express  or  im- 
plied, is  immaterial,  provided  the  intention  of  thedebtor 
to  secure  the  creditor  is  not  doubtful,  and  provided  also 
that  the  property  by  means  of  which  the  security  is 
given  is  clearly  identified.'^^ 

548.  These  principles  have  received  their  applica- 
tion from  the  Supreme  Court  of  the  Ignited  States  in 
numerous  cases  up  to  the  present  day.  The  uniformity 
of  its  jurisprudence  on  this  subject  has  been  but  sel- 
dom disturbed.  In  a  verv  recent  case  the  court  held 
that  every  express  executorv  agreement  in  writing, 
whereby  the  contracting  partv  sufficiently  indicates  an 
intention  to  make  some  particular  property,  real  or 
personal,  or  fund,  therein  described  or  identified,  a 
security  for  a  debt  or  other  obligation  ;  or  whereby 
the  party  promises  to  convey,  or  a.ssign,  or  transfer 
the  propert}'  as  securitv,  creates  an  equitable  lien  upon 
the  property  so  indicated,  which  is  enforceable  against 
the  property'  in  the  hands  not  only  of  the  original 
contractor,  but  of  his  heirs,  administrators,  executors, 
voluntary  assignees  and  purchasers,  or  encumbrancers 
with  notice.  And  the  syllabus  of  the  opinion  shows, 
further,  that  to  dedicate  property  to  a  particular  pur- 
pose,   to    provide    that  a  specified  creditor,    and    that 


Ponierov.  Equitv  Juiispnidem-e,  Vol.  3.  Sees.  1235.  1237. 
Flagg  vs.  Mann."  2  Suinn.  (U.  S.)  486.  533. 


Equitable  IjIP^xs  of  the  Common  Law.  497 

creditor  alone,  shall  be  authorized  to  seek  payment 
from  it  or  its  value,  is  to  create  an  equitable  lien 
upon  it. 

In  that  case  Walker  &  Co.  were  dealing  in  business 
with  Lloyd  &  Co.,  who  held  certain  bonds  belonging 
to  Brown,  loaned  by  him  to  them  to  aid  them  in  their 
affairs.  Brown  wrote  to  Walker&  Co.  a  letter  in  these 
words :  "I  beg  to  advise  you  that  the  loan  of  fifteen 
thousand  dollars,  Memphis  bonds,  made  by  me  to 
Mr.  J.  C.  Lloyd  for  the  use  of  Messrs.  Lloyd  &  Co., 
Ellensburg,  Wash.  Ter.,  is  with  the  understanding 
that  any  indebtedness  that  they  may  be  owing  you  at 
any  time  shall  be  paid  before  the  return  to  me  of  these 
bonds,  or  the  value  thereof,  and  that  these  bonds,  or 
the  value  thereof,  are  at  the  risk  of  the  business  of 
Lloyd  &  Co.,  so  far  as  an^-  claim  you  may  have 
against  said  Lloyd  &  Co.  is  concerned." 

On  the  faith  of  that  letter  Walker  &  Co.  sold  goods 
on  credit  to  Lloyd  &  Co.  In  the  meantime,  Lloyd 
&  Co.,  who  had  pledged  the  bonds  to  the  Union  Na- 
tional Bank  of  Chicago,  redeemed  the  pledge  and 
returned  the  bonds  to  Brown.  Subsequently  he  died, 
after  having  given  the  bonds  to  his  wife.  Walker  & 
Co.  claimed  an  equitable  lien  on  the  bonds  against 
the  administrators  of  Brown  and  his  wife.  The  court 
decided  that  the  lang^uage  of  Brown's  letter  clearlv 
desiojnated  the  bonds  as  security  for  the  debt  due 
Walker  &  Co.,  and  declared  the  express  intention  of 
Brown  to  create  an  equitable  lien  upon  them  in  favor 
of  Walker  &  Co.* 


*  Walker  vs.  Brown.  1G5  U.  S.  654. 


498  The  Law  of  Pledge. 

549.  In  the  same  year  in  which  that  case  was  de- 
cided, the  Supreme  Court  held  that  there  was  an  equi- 
table assignment,  equivalent  to  an  equitable  lien,  in  a 
transaction,  in  which  a  check  drawn  upon  a  bank  was 
to  be  paid  out  of  a  particular  fund,  with  the  under- 
standins:  between  the  drawer  and  the  drawee  that  the 
particular  fund  drawn  from  was  intended  by  the 
drawer  to  be  the  security  of  the  drawee  for  the  sums 
loaned  by  the  former  to  the  latter.  The  court  made 
the  distinction  between  a  check  drawn  in  ordinary 
circumstances,  which  creates  no  equitable  assignment 
and  entitles  the  holder  to  no  priority  of  payment  over 
the  general  creditors  of  the  drawer,  and  a  check  drawn 
under  circumstances  which  indicate  the  intention  of 
the  drawer  to  constitute  an  assignment  of  the  fund  in 
favor  of  the  creditor  for  the  purpose  of  securing  him. 

The  Court  said  in  that  case  :  "  Whilst  an  equitable 
assignment  or  lien  will  not  arise  against  a  deposit 
account  soleh'  by  reason  of  a  check  drawn  against  the 
same,  yet  the  authorities  establish  that,  if  in  the 
transaction  connected  with  the  delivery  of  the  check, 
it  was  the  understanding  and  agreement  of  the  parties 
that  an  advance  about  to  be  made  should  be  a  charge 
on,  and  be  satisfied  out  of  a  specified  fund,  a  court  of 
equity  will  lend  its  aid  to  carry  such  agreement  into 
effect  as  against  the  drawer  of  the  check,  mere  volun- 
teers and  parties  charged  with  notice.  This  is  but  an 
application  of  the  general  doctrine  of  equitable 
assignments  or  liens  announced  b}'  this  Court  in 
Ketchum  vs.  St.  Louis,  loi  U.  S.    306.  where    it  was 


Equitable  Liens  ok  the  Common  Law.  499 

held,  citing  various  authorities  and  text  writers,  that: 
'  A  part}'  niay,  by  agreement,  create  a  charge  or 
claim  in  the  nature  of  a  lien  on  real  as  well  as  on 
personal  property  whereof  he  is  the  owner  or  in  pos- 
session, which  a  court  of  equity  will  enforce  against 
him,  and  volunteers  or  claimants  under  him  with 
notice  of  the  agreement/  It  is  immaterial,  for  the 
purposes  of  this  case,  to  draw  a  line  of  distinction 
between  equitable  assignments  and  equitable  liens  or 
charges."* 

550.  There  seems  to  be  no  difficulty  in  the  estab- 
lishment of  an  equitable  lien  when  it  results  from  the 
express  terms  of  an  agreement  between  the  debtor 
and  the  creditor*  but  when  the  intention  to  create  the 
lien  is  only  implied  in  the  transaction,  and  to  be 
inferred  from  the  circumstances  of  the  case,  the  ques- 
tion then  is  by  no  means  of  easy  solution,  and  may  give 
rise  to  the  most  diversified  opinions.  We  find  a  re- 
markable instance  of  it  in  the  well-known  case  of 
Ketchum  vs.  St.  Louis.  The  issue  involved  was 
whether  an  act  of  the  General  Assembly  of  Missouri, 
under  which  the  county  of  St.  Louis  loaned  its  bonds 
to  the  Pacific  Railroad  Company,  created,  on  its  accept- 
ance by  the  company  and  the  county,  an  equitable 
lien  or  charge,  in  favor  of  the  county,  upon  the  earn- 
ings of  the  road,  to  the  extent  necessary  to  meet  the 
interest  upon  the  bonds  as  it  accrued.  The  act  from 
which  it  was  contended  that  the  lien  arose  was  in 
these  words : 

*  Fourth  street  Bank  vs.  Yardley,  10.")  U.  S.  634. 


500  Thk  Ijaw  ok  Pledge. 

"  Section  i.  The  county  court  of  St.  Louis  county 
is  hereby  authorized  to  issue  seven  hundred  county 
bonds  of  the  denomination  of  $1000  each,  having 
twenty  years  to  run  and  bearing  interest  at  the  rate 
of  7  per  cent,  per  annum,  payable  semi-annuall}',  the 
principal  and  interest  payable  in  the  city  of  New  York, 
and  loan  said  bonds  to  the  Pacific  Railroad  Company 
for  the  completion  of  said  road ;  said  bonds  to  be 
issued  under  such  conditions  as  may  be  agreed  upon 
between  said  county  court  and  the  board  of  directors 
ofthePacitic  Railroad  Company,  such  conditions  to 
be  binding  on  the  parties,  but  shall  not  impair  or 
affect  the  \alidity  of    the   bonds   after  they  are  issued. 

'  *•  Sec.  2 .  The  fund  commissioner  of  the  Pacific  Rail- 
road, or  such  person  as  may  at  any  time  hereafter  have 
the  custody  of  the  funds  of  said  railroad  company, 
shall,  every  month  after  said  bonds  are  issued, 
pay  into  the  count}'  treasury  of  St.  Louis  county,  out 
of  the  earnings  of  said  Pacific  Railroad,  $4000,  and 
$1000  additional  in  each  month  of  December,  to  meet 
the  interest  on  the  said  seven  hundred  bonds  ;  said 
payments  to  continue  until  said  bonds  are  paid  off  by 
the  Pacific  Railroad. 

*'  This  Act  to  take  effect  and  be  in  force  from  and 
after  its  passage.'' 

The  Court  lield  that  this  act,  being  accepted  by  the 
parties,  constituted  an  equitable  assignment  of  the 
earnings  of  the  railroad  company  and  created  an 
equitable  lien  upon  them  in  favor  of  the  count}'.  The 
majorit\'  of  the  Supreme  Court  sa~v  nothing  doubtful 


Equitable  Liens  of  the  Common  Law.  501 

in  the  implied  intention  of  tlic  parties  to  create  the 
Jien-y  but  the  two  dissenting  Justices  ^^  ere  equally 
positi\e  that  there  is  nothing  in  the  transactioit 
imptying  such  an  intention.     The  Court  said  : 

''  That  the  Legislature  intended  by  the  Act  of  1865 
to  make  a  specific  appropriation  of  the  earnings  for 
that  purpose  ;  that  the  prior  lien  of  the  State  was,  to 
that  extent,  waived  in  favor  of  the  countv  :  and  that 
such  appropriation  and  waiver  were,  by  agreement  of 
all  the  parties  then  interested  in  the  property  and  the 
disposition  of  its  income,  to  continue  until  the  bonds 
themselves  were  paid  or  the  county  discharged  from 
liability  thereon,  we  entertain  no  doubt.  It  was  not 
a  simple,  naked  covenant  to  pay  out  of  a  particular 
fund ;  but  the  Act,  being  accepted  by  the  parties 
interested,  operated  as  an  equitable  assignment  of  a 
fixed  portion  of  that  fund — an  assignment  which 
became  effectual  without  any  further  intervention 
upon  the  part  of  the  debtor,  and  which  the  part}' 
holding  the  funds  of  the  company,  whether  the  fund 
commissioner  or  some  other  person,  could  respect 
without  liability  to  the  debtor  for  so  doing.  It  was 
an  arrangement,  based  upon  a  valuable  consideration, 
which  neither  the  State  nor  the  compan}-,  nor  both, 
nor  parties  claiming  under  either,  with  notice,  could 
disregard  without  the  assent  of  the  county,  expressed 
by  those  who  had  authority  to  bind  it.  It  was  an 
engagement  to  pay  out  of  a  specially  designated  fund, 
accompanied  by  express  authority  to  Its  custodian  to 
apply  a    specific  part  thereof  to  a  definite  object,   in 


502  The  Law  of  Pledge. 

the  accomplishment  of  which  all  the  parties  to  the 
arrangement  were  directly  interested/"' 

Two  of  the  Justices  of  the  court,  on  the  contrary, 
declared  that  they  were  unable  to  discover  in  the  con- 
tract between  the  company  and  the  county,  or  in  the 
act  of  the  Legislature,  or  in  either,  anything  that 
created  an  equitable  lien  upon  the  earnings  of  the 
railroad  company,  or  upon  any  of  its  property  ;  and 
that  nothing  more  was  expressed  between  the  parties 
than  a  confident  expectation  that  the  earnings  would 
prove  sufficient  to  pay  the  interest  on  the  county  loan  * 

We  see  therefore  that  there  is  in  the  understanding 
of  equitable  liens  arising  from  an  implied  intention  of 
the  debtor  the  same  difficulty  and  the  same  diversity 
of  opinion  that  there  is  in  the  interpretation  of  all 
ambiguous  agreements,  an  interpretation  which  is  all 
the  more  difficult  that  the  parties  to  the  agreement 
themselves  may  not  have  had  any  clear  or  definite 
intention  or  understanding. f 


•  Ketchum  vs.  St.  Louis,  101  U.  S.,  pp.  306,  314,  319. 
t  Wniiams  et  al.  vs.  Ingersoll  et  al.,  89  N.  Y.  508. 


CHAPTER  XLVI. 

551.  I  find  nowhere,  either  in  treatises  or  in  adju- 
dicated cases,  the  nature  and  theory  of  the  equitable 
lien  so  well  explained  as  in  the  following  words  of 
Professor  Pomeroy :  ''When  equit}'  has  jurisdiction 
to  enforce  rights  and  obligations  growing  out  of  an 
executory  contract,  this  equitable  theory  of  remedies 
can  not  be  carried  out,  unless  the  notion  is  admitted 
that  the  contract  create  some  rig-ht  or  interest  in  or 
over  specific  property,  which  the  decree  of  the  court 
can  lay  hold  of,  and  by  means  of  which  the 
equitable  relief  can  be  made  efficient.  The  doctrine 
of  equitable  liens  supplies  this  necessary  element ;  and 
it  was  introduced  for  the  sole  purpose  of  furnishing  a 
ground  for  the  specific  remedies  which  equity  confers, 
operating  upon  particular  identified  propert}^,  instead 
of  the  general  pecuniary  recoveries  granted  by  courts 
of  law.  It  follows,  therefore,  that  in  a  large  class  of 
executory  contracts,  express  and  implied,  which  the 
law  regards  as  creating  no  property  right,  nor  interest 
analogous  to  property,  but  only  a  mere  personal  right 
and  obligation,  equity  recognizes,  i7i  addition  to  the 
personal  obligation^  a  particular  right  over  the  thing 
concerning  which  the  contract  deals,  which  it  calls  a 
'  lien,'  and  which,  though  not  property,  is  analo- 
gous to  property,  and  by  means  of  which  the  plaintiff 
is  enabled  to  follow  the  identical  thing,  and  to  enforce 
the  defendant's  obligation  by  a  remedy  which  operates 

503 


004  The  Law  of  Pleuge. 

directly  on  that  thinoj.  The  theory  of  equitable  Hens 
has  its  ultimate  foundation,  therefore,  in  contracts, 
express  or  implied,  which  either  deal  with,  or  in  some 
manner  relate  to,  specific  property,  such  as  a  tract  of 
land,  particular  chattels,  or  securities,  a  certain  fund, 
and  the  like.  It  is  necessary  to  divest  one's  self  of 
the  purely  legal  notion  concerning  the  effect  of  such 
contracts,  and  to  recognize  the  fact  that  equity  regards 
them  as  creating  a  charge  upon,  or  hypothecation  of 
the  specific  thing,  by  means  of  which  the  personal 
obligation  arising  from  the  agreement  may  be  more 
effectively  enforced  than  by  a  mere  pecuniary  recovery 
at  law."* 

552.  The  hypotheca  of  the  Romans  was  a  mode  of 
contractual  security  ;  the  right  of  preference  arose  from 
a  stipulation  between  the  creditor  and  the  debtor;  the 
nature  or  quality  of  the  debt  was  no  condition  of  the 
encumbrance  upon  the  debtor's  propert}-,  any  more 
than  in  the  modern  mortgage  of  either  the  Civil  or  the 
Common  law.  But  the  Romans  had  also  the  -privi- 
les^ia  as  a  mode  of  real  security  attaching  to  the  res, 
the  property  of  the  debtor,  in  favor  of  the  creditor,  and 
giving  to  the  latter  a  right  of  priority  over  the  other 
creditors  of  the  former.  The  privilegiiim^  like  the 
hypotheca^  left  the  possession  of  the  property  with  the 
debtor,  but  fixed  upon  it  the  legal  tie  or  lien  which  fol- 
lowed it  into  the  hands  of  third  persons  and  secured  the 
creditor's  right  of  preference.  Such  are  the  privileges 
of  the  modern  Civil  law.      They  have,  in  common  with 

*  Pomeroy,  Equity  Jurisprudence,  Vol.  H.  pp.  232.  23.S. 


Equitable  Liens  of  the  Common  Ijaw.  505 

the  equitable  liens  of  the  Common  law.  the  principle 
that  they  do  not  deprive  the  debtor  of  the  use  and  en- 
joyment of  his  property,  and  that  they  follow  it  and 
remain  attached  to  it.  But  they  differ  from  the  equi- 
table liens  in  two  fundamental  principles :  first,  they 
are  not  and  can  not  be  created  by  contract,  but  arise 
solely  from  the  law ;  and  secondly,  they  may  bear,  at 
the  same  time,  upon  several  pieces  of  property,  and 
are  not  always  limited  in  their  action  to  any  particu- 
lar or  specific  one.  Inasmuch,  therefore,  as  the  equi- 
table lien  is  created  by  the  consent  and  intent,  ex- 
press or  implied,  of  the  debtor,  and  the  -privilege  is 
created  by  the  law  only,  without  the  consent  of  the 
debtor,  we  ma}'  say  that  the  Civil  law  has  no  equitable 
liens  and  repels  them. 

553.  The  privileges  are  established  by  reason  of  the 
nature  and  quality  of  the  debt,  and,  therefore,  arc 
made  to  affect  either  the  debtor's  property  generally, 
or  some  particular  one.  And,  as  the  law  deems  cer- 
tain obligations  to  be  of  a  higher  order  than  others 
and  should,  therefore,  be  satisfied  first  out  of  the  debt- 
or's property,  it  follows,  first,  that  privileges  are  supe- 
rior to  mortorasfes  and  rank  them  in  the  distribution 
of  an  insolvent's  assets ;  and,  secondly,  that  among 
the  privileges  themselves  some  are  of  a  higher  order 
than  others  and  are  the  first  to  be  satisfied. 

Domat  defines  them  in  a  clear  and  terse  manner : 
"The  privilege  of  a  creditor  is  the  superior  right 
which    the  quality  of    his    claim    gives    him   and  for 


506  The  Law  ok  Pledge. 

which  he  is  preferred  to  other  creditors,  even  to  the 
raortgaoje  creditors."  ^^ 

554.  The  general  principles  of  the  law  of  privileges 
are  well  stated  in  the  following  articles  of  the  Civil 
Code  of  Louisiana,  which  have  been  taken  verbatim 
from  the  Code  Napoleon  : 

Article  3182.  ""Whoever  has  bound  himself  per- 
sonally is  obliged  to  fulfil  his  engagements  out  of  all 
his  property,  movable  and  immovable,  present  and 
future." 

Article  3183.  "The  property  of  the  debtor  is  the 
common  pledge  of  his  creditors  and  the  proceeds  of 
its  sale  must  be  distributed  among  them  ratably, 
unless  there  exist  among  the  creditors  some  lawful 
causes  of  preference." 

Article  3184.  "Lawful  causes  of  preference  are 
privileges  and    mortgages." 

Article  3185.  "Privileges  can  be  claimed  onl}' for 
those  debts  in  which  it  is  expressly  granted  in  this 
Code." 

Article  3186.  ''''Privilege  is  a  right  which  the  nature 
of  a  debt  gives  to  a  creditor,  and  which  entitles  him 
to  be  preferred  before  other  creditors,  even  those  who 
have  mortgages." 

Article  3187.  "Among  creditors  who  are  privi- 
leged, the  preference  is  settled  by  the  different  nature 
of  their  privileges." 


*  Droit,  Lois  Civiles,  See.  5,  p.  35. 
l*ont,  Di'S  Privilej^ps,  Vol.  1,  pp.  10  et  seq. 
Battur,  Des  Privileges,  Vol.  1,  p.  1. 
Troplong,  Des  Privileges,  Vol.  1,  pp.  13  and  28. 


Equitable  Liens  of  the  Common  Law.  507 

Article  3188.  "The  creditors  who  are  in  the  same 
rank  of  privileges  are  paid  in  concurrence,  that  is,  on 
an  equal  footing-." 

Article  3189.  "  Privileges  may  exist  either  on  mov- 
ables or  immovables,  or  on  both  at  once." 

Article  3190.  "  Privileges  are  either  general  or 
special  on  certain   movables."  * 

555.  It  follows  from  these  principles  that,  not  only 
privileges  can  not  be  stipulated  between  the  debtor 
and  the  creditor,  but,  furthermore,  they  can  not  be 
extended  by  implication  from  the  letter  of  the  law 
which  establishes  them.  They  are  strictissifnce  inter- 
pretationis.  Where  they  are  not  specifically  estab- 
lished by  statute,  they  do  not  exist  at  all,  and  can  not 
be  brought  into  existence  by  custom.  The  rule  has 
so  often  been  declared  and  applied  by  the  Court  of 
Louisiana  that  it  has  become  a  trite  subject  in  the 
jurisprudence  of  that  State. f 

556.  Yet,  in  two  cases,  the  equitable  lien,  as  such, 
but  not  eo  notnine.  has  been  recog^nized  by  the  Court 
of  Louisiana.  It  was  evidently  a  departure  from  the 
true  doctrine  of  the  Civil  law  and  a  submission  to  the 
pressure   of   the   Common    law  and    equity   jurispru- 


*  Code  Napoleon,  Arts.  2092,  2093,  2094,  2095,  2096,  2097. 
t  Landry  vs.  Blanchard,  16  La.  An.  173. 

Martin  vs.  Casey,  15  La.  An.  165. 

Shaw  &  Co.  vs.  Grant.  13  La.  An.  52. 

Svvasey  &,  Co.  vs.  ►'^teamer,  12  La.  An.  800. 

Cochran  &  Co.  vs.  Walker,  10  La.  An.  431. 

Shropshire  vs.  Russell,  2  La.  An.  962. 

Labouisse  vs.  Rope  Company,  43  La.  An.  245. 

State  vs.  Bank,  3;^  La.  An.  706. 

Bank  vs.  Korean,  37  La.  An.  861. 

Morris  ef  «i,  vs.  Lalaurie  tt  als..  39  La.  An.  53. 


508  The  Law  of  Pledge. 

dence.  For  instance,  when  the  scrip  certificates  of  a 
mutual  insurance  company  were  transferable  on  the 
books  of  the  company  only  by  the  scripholder  or  his 
agent,  and,  in  case  the  scripholder  was  indebted  to 
the  company,  the  amount  of  the  scrip  was,  by  the 
charter  of  the  company,  to  set  off  the  indebtedness, 
the  administrator  of  the  deceased  scripholder' s  estate 
having  sold  the  scrip,  and  demanding  that  the  com- 
pany should  be  ordered  to  make  the  transfer  on  its 
books  to  the  purchaser,  the  court  recognized  the  right 
of  the  company  to  be  paid  the  proceeds  of  the  scrip 
by  preference  over  the  other  creditors  of  the  decedent. 
The  court  clearly  recognized  the  equitable  lien  in  this 
case  when  it  said:  ""It  ma}-  be  conceded  that  the 
company  is  not  entitled  to  a  priiiilege  upon  the  fund 
in  dispute,  using  the  term  in  its  technical  sense.  But 
we  think  the  equity  of  the  company  to  receive  this 
fund  bv  reason  of  the  peculiar  terms  of  their  contract 
with  Walsh  and  the  circumstances  of  the  case  is 
clear.''  '" 

It  would  not  be  possible  to  acknowledge  and  apply 
the  equitable  lien  more  distinctly,  however  incom- 
patible it  may  be  with  the  doctrine  of  the  Civil  law 
privilege. 

557.  In  another  remarkable  case,  the  Court  recog- 
nized again  the  principle  of  the  equitable  lien  and 
applied  it.  A  planter  and  sugar  manufacturer  had 
agreed  with  his  commission  merchant  that,  for  the 
purpose  of  more  completely  securing  the  latter  for  his 


*  Succession  of  Walsh,  9  La.  An.  543. 


Equitable  Liens  of  the  Common  Law.  509 

advances,  the  merchant  would  apply  in  his  own  name 
to  the  United  States  Government  for  a  license  as  pro- 
ducer of  sugar,  under  the  bounty  law  of  Congress  : 
and  that  the  amount  of  bounty  received  b}-  the  mer- 
chant would  be  retained  by  him  in  pa3ment,  or  part 
payment,  of  his  advances  to  the  planter.  It  was  so 
done.  The  planter  subsequently  failed,  and  his 
creditors  contested  the  right  of  the  commission  mer- 
chant to  retain  the  amount  of  bounty  received  by 
him,  on  the  ground  that  he  had  neither  a  pledge  nor 
a  privilege  under  the  law  of  Louisiana.  The  Court 
said:  "  The  contract  between  the  parties  in  reference 
to  the  license  may  be  an  innominate  one,  possibly  it 
may  not  be  strictly  classed  as  a  pledge,  but  be  it 
what  it  may,  it  was  legal  and  vested  the  legal  title  to 
and  control  over  the  bounty,  and  authorized  its  appli- 
cation in  a  manner  and  to  a  purpose  whicli  neither 
Lacaze  (the  planter)  nor  his  syndic  can  disregard."* 
The  motive  of  the  decision,  rather  than  the  reason 
of  it,  was  clearly  the  equity  of  the  case,  and  a  sub- 
mission to  the  principle  which  constitutes  the  equitable 
lien  of  the  Common  law,  to-wit :  the  intention  of  the 
debtor,  expressed  in  the  contract,  to  secure  the  cred- 
itor out  of  a  particular  fund.  The  decision  could  rea- 
sonably stand  upon  no  other  ground ;  there  was  in 
the  case  neither  a  pledge  nor  a  privilege  under  the 
Civil  law,  nor  a  chattel  mortgage  under  the  Common 
law.  The  legal  title,  as  distinguished  from  the  equi- 
table title,  is  unknown  to  the   Civil  law  as  a  tenure  of 

*  Webre,  Syndic,  vs.  Beltran  &  Co.,  47  La.  An.  203. 


510  The  Law  of  Pledge. 

property.  There  was  in  the  case  only  one  principle 
or  rule  of  law,  and  that  was  the  equitable  lien.  The 
judgment  was,  therefore,  in  opposition  to  the  law  of 
Louisiana,  inasmuch  as,  in  that  State,  the  pledge  and 
the  privilege  are  the  only  two  legal  modes  in  which 
personal  or  movable  property  can  be  used  as  security 
of  a  debt. 

The  statutory  or  codal  law  of  that  State  is  clear, 
positive  and  exclusive  of  any  common  law,  in  matters 
of  privileges.  It  is  even  expressly  and  specifically 
prohibitive  of  any  extension  by  the  courts,  of  the  class 
of  privileges  established  by  the  Code.  Art.  3185  pro- 
vides that:  "  Privilege  can  be  claimed  only  for  those 
debts  to  which  it  is  expressly  granted    in    this   Code." 

558.  The  jurisprudence  of  the  State  has  been 
emphatic  on  this  point  in  a  long  line  of  decisions. 
Such  expressions  as  the  following  arc  found  in  ever}' 
one  of  them  :  ''  The  stipulation  in  an  act  of  sale,  that 
the  amount  paid  b}'  the  vendor  to  insure  the  property 
sold,  in  case  he  neglects  to  do  it,  shall  be  secured  by 
privilege  on  the  property-,  has  no  legal  effect  whatever, 
as  privileges  can  only  be  created  by  lavo^  and  not  by 
the  agreement  of  par  ties.'' "^^ 

The  fact  that,  in  the  case  quoted  from,  the  license 
for  the  bounty  was  applied  for  and  obtained  in  the 
name  of  the  merchant,  was  a  matter  between  the 
government  and  him  ;  but  that  did  not  make  the 
bounty    money  his    own,   for,  by   his  very  agreement 


*  State  vs.  Bank,  33  La.  An.  705  (Syllabus). 
Bank  vs.  Maureau  et  als..  37  La.  An.  SGI. 


Equitabli:  Liens  op  the  Common  Law.  511 

with  the   planter,  and  as  recognized  by   the    Court,   it 
was  to  act  as  security  of  the  debt. 

559.  The  same  Court  decided,  the  year  after,  that 
the  bounty,  under  the  same  law  of  Congress,  could 
not  be  the  subject  of  a  pledge  under  the  following 
circumstances.  It  was  agreed  between  the  planter 
and  the  commission  merchant,  in  order  to  secure  the 
latter  for  his  advances,  that  the  planter  would  pay  the 
bounty  to  the  creditor  immediately  after  receipt  of  the 
amount,  ''justasif  the  bounty  had  been  a  portion  of  the 
proceeds  of  the  crops  of  the  plantation."  The  Court 
said:  '''It  is  hardly  necessary  to  cite  authority  in 
support  of  the  proposition  that  delivery  is  an  essential 
in  order  to  secure  a  pledge  (save  in  statutory  pledges, 
not  the  case  here).  The  bounty  was  not  a  portion 
of  the  proceeds  of  the  crop  ;  it  was  no  part  of  the 
crop.  We  know  of  no  principle  of  interpretation 
under  which  it  is  possible  to  hold  that  the  bounty  was 
delivered  as  required,  and  came  within  the  provisions 
of  the  statute  relative  to  pledge  as  security."* 

\r\  this  case,  the  Court  properly  disregarded,  under 
the  principles  of  the  Civil  law  of  Louisiana,  the 
equitable  lien  which,  at  Common  law,  would  have 
sprung,  in  favor  of  the  creditor,  from  the  debtor's 
express  intention  to  secure  him  out  of  a  particular 
fund. 

560.  In  another  instance  the  Louisiana  Court  re- 
jected also  what  would  be  under  the  Common  law 
very    clearly  an    equitable    lien,   if  not   an    equitable 

*  Delogny  vs.  Creditors,  48  La.  An.  493. 


512  The  Law  of  Pledge. 

mortgage.  In  that  case  Benjamin  obtained  from 
Aldige  the  loan  of  a  sum  of  money  to  enable  him  to 
pay  the  price  of  real  estate  purchased  by  him.  He 
gave  the  lender  his  note  of  hand  for  the  same  amount 
payable  to  the  order  of  the  lender  and  declaring  in 
the  note  that  the  amount  had  been  advanced  to  him 
by  Aldig^  to  pay  for  the  property.  Benjamin  then 
w^ent  before  a  notary  public  and  made  the  sworn 
declaration,  written  on  the  back  of  the  note,  that  he 
was  indebted  to  Aldige  in  the  sum  stated  in  the  note, 
and  that  the  money  was  advanced  to  him  by  Aldige 
to  pay  for  certain  property  which  was  described  and 
identified  in  said  declaration.  He  stated  further,  in 
the  same  writing,  on  the  back  of  the  note:  "That, 
in  order  to  secure  the  pa3'ment  or  reimbursement  of 
the  said  sum  to  the  said  Aldige,  he,  the  affiant,  does 
hereby  recognize  and  acknowledge  in  favor  of  the 
said  Aldige  a  privilege  and  lien  on  the  above  de- 
scribed property,  and  he  does  also  authorize  the  re- 
cording of  the  said  lien  and  privilege  in  the  office  of 
the  recorder  of  mortgages  for  the  parish  of  Orleans." 
The  document  was  recorded.  The  question  arose 
as  to  the  right  of  preference  or  priority  of  Aldige 
under  the  terms  of  the  agreement,  over  the  proceeds 
of  the  property.  By  the  law  of  Louisiana  it  is  neces- 
sar}'  for  the  validity  of  a  mortgage  that  the  contract 
be  in  writing,  private  or  authentic,  that  the  amount 
secured  be  stated  and  that  the  propert}*  mortgaged  be 
described  and  identified.  The  court  held  that  the 
document  in  question   did  not  establish  a  privilege  or 


Equitable  Liens  of  the  Common  Law.  513 

lien  because  such  can  not  be  created  by  contract,  and 
that  it  did  not  establish  a  mortgage  because  the  inten- 
tion of  the  parties  was  to  establish  a  privilege  or  lien. 

The  chief  justice  of  the  court  dissented  on  the 
ground  that  the  fact  that  the  parties  used  the  words 
privilege  and  lien  did  not  invalidate  the  transaction, 
when,  in  reality,  they  intended  to  establish  a  mort- 
gage on  the  property  to  secure  the  loan ;  and  that, 
besides,  the  term  lien  was  generic  and  could  be  used 
to  mean  mortgage^  and  had  on  many  occasions  been 
used  in  that  sense  by  the  courts  of  Louisiana.* 

561.  These  questions  of  equitable  liens,  established 
and  enforceable  under  the  Common  law,  and  denied 
and  repelled  by  the  Civil  law,  present  great  difficul- 
ties and  are  fraught  with  very  serious  consequences 
when  they  are  raised  in  tlie  State  of  Louisiana,  in  the 
Federal  Courts  sitting  in  that  State.  Then  arise  the 
anomalies,  the  inconsistencies,  the  contradictions, 
amounting  to  injustice,  or  its  equivalent,  the  want  of 
equal  justice,  of  a  dual  system  of  jurisdiction  and  of 
jurisprudence  in  the  same  State.  Under  the  law  of 
Louisiana  no  preference  or  priority  is  afforded  to 
creditors  over  the  proceeds  of  the  movable  or  per- 
sonal property  of  the  debtor^  unless  it'.is  by  virtue  of 
statutory  privilege  or  contractual  pledge.  Under  the 
principles  of  equity  jurisprudence  the  mere  consent 
and  intention  of  the  debtor  to  grant  such  preference 
or  priority  creates  an  equitable  lien.  Under  one  sys- 
tem of   law,  an  inchoate  pledge,  lacking  the  essential 


*  Succession  of  Benjamin,  89  La.  An.  612. 


514  The  Law  of  Pledge. 

elements  of  that  kind  of  contract,  but  showing  the 
intention  and  promise  of  the  debtor  to  make  a  vahd 
one,  is  perfected  by  the  court  of  equity  and  given  full 
effect  to.  Under  the  other  system,  the  imperfect 
pledge,  on  the  contrary,  produces  no  effect  whatever, 
and  the  court  of  law,  far  from  validating  the  incom- 
plete contract,  sets  it  aside  altogether.  If,  in  a  case 
of  this  kind,  the  Federal  Court  will  apply  the  statutory 
law  of  Louisiana,  there  is  no  conflict  or  antagonism 
between  its  judgment  and  that  of  the  State  Court  in  a 
corresponding  case.  But  if  the  Federal  Court,  on  the 
contrary,  will  ignore  the  statutory  law  of  Louisiana 
and  apply  the  principles  of  equity  jurisprudence,  then 
there  are,  in  similar  cases,  two  opposite  judgments. 
The  alien  is  decreed  in  one  court  to  be  a  privileged 
creditor;  the  citizen  of  Louisiana  is  decreed  in  the 
State  Court  to  have  no  privilege.  Two  laws,  there- 
fore, which  are  in  direct  conflict  with  each  other  and 
are  destructive  of  one  another  are  found  to  coexist  in 
the  same  State,  and  to  be  administered  by  different 
tribunals  upon  different  classes  of  persons.  The  for- 
eigner is  declared  to  possess  valuable  rights  which  the 
citizen  of  the  State  in  similar  cases  is  declared  not  to 
possess,  under  the  same  municipal  law,  which  should 
apply  to  both  equally  and  in  the  same  manner. 

562.  But  the  question  of  the  power  of  the  Federal 
Courts  to  recognize  the  validit}'  of  equitable  liens  in 
Louisiana  when  the  law  of  the  State  forbids  them  is 
far  from  being  settled.  In  one  case  only  did  the 
Supreme   Court  of  the  United  States  declare  that   an 


Equitable  Liens  of  the  Common  Law.  515 

equitable  lien  could  be  found  in  Louisiana.  But  the 
case  turned  upon  the  law  of  insurance  and  the  right  of 
the  mortgagee  to  receive  the  insurance  money  under  a 
policy  taken  by  the  mortgageor.  There  was  no  com- 
petitor, or  other  creditor,  claiming  an  equal  distribu- 
tion. There  was  no  question  of  the  right  of  prefer- 
ence or  priority  arising  from  the  equitable  lien.  The 
authorities  cited  by  the  Court  from  the  jurisprudence 
of  Louisiana  only  showed  that  the  doctrine  of  equity 
obtained  in  that  State  ;  but  not  as  a  cause  of  prefer- 
ence or  privilege  or  priority.  The  question  whether 
the  Federal  Court,  in  its  equity  jurisdiction,  could 
ignore  the  municipal  law  of  the  State  when  the  latter 
was  not  in  conflict  with  the  Constitution  or  laws  of 
the  United  States,  was  not,  even  remotely,  considered 
in  the  case."*^ 

563.  In  the  well-known  case  of  Casey  vs.  Cavaroc, 
there  was  a  promise  of  pledge  on  the  part  of  the 
debtor,  and  an  informal  and  insufficient  execution  of 
the  contract.  It  was  a  clear  case  for  a  court  of  equity, 
out  of  the  State  of  Louisiana,  where  its  municipal 
law  would  not  allow  it,  to  recognize  the  equitable  lien 
arising  from  the  agreement  of  the  parties,  and  to 
enforce  it,  however  defective  the  pledge.  But  the 
Supreme  Court  of  the  United  States  would  not  recog- 
nize the  validity  of  the  pledge  and  rejected  the  claim 
of  the  creditor  for  a  preference  over  the  property  which 
was  intended  to  serve  as  security  of  his  claim  ;  the 
court   deciding   that,  under  the   law  of  Louisiana,  he 


*  Wheeler  vs.  Insurance  Company,  101  U.  S.  439. 


516  The  Law  of  Pledge. 

was  entitled  to  no  privilege  or  priority  the  moment 
his  pledge  was  null/" 

564.  In  a  very  recent  case,  the  parties  to  a  contract 
had  stipulated  in  favor  of  the  creditor,  for  an  equitable 
lien  over  the  sugar  bounty  money  to  be  paid  to  the 
producer,  who  was  the  debtor  in  the  case.  There,  the 
question  was  squarel}-  presented,  whether  the  equitable 
lien  could  be  recognized  by  the  Federal  Court  not- 
withstanding the  law  of  Louisiana  which  prohibited 
it.  The  Circuit  Court  of  the  United  States  held  that, 
under  its  equity  jurisdiction,  it  was  not  controlled  bv 
the  State  law,  and  decreed  the  validity  of  the  equita- 
ble lien.  The  Circuit  Court  of  Appeals  would  not 
decide  the  point  and  certified  it  to  the  Supreme  Court, 
which  disposed  of  the  case  on  a  different  ground,  but 
would  not  express  an  opinion  on  the  point  in  question. 
The  Supreme  Court  said  : 

"  The  right  to  collect  the  bounty  having  arisen 
from  a  law  of  the  United  States,  and  the  provisions 
of  the  law  creating  a  necessary  relation  between  the 
grower  and  the  manufacturer,  making  them  in  effect 
joint  producers  of  the  sugar,  the  right  to  the  equitable 
lien  stipulated  b}-  the  contract  was  not  controlled  bv 
the  provisions  of  the  local  law  of  Louisiana,  even 
although,  as  a  general  rule  and  in  regard  to  this  we 
express  no  opinion,  the  effect  of  that  law  would  be  to 
deprive  contrncting  parties,  except  when  expressly 
allowed,    of  the    right    to    contract    for    an   equitable 

*  Casev  vs.  Cavaroc.  06  U.  S.  4(57. 


Equitable  Liens  op  the  Common  Law.  517 

lien  ;  and  to  deny  to  courts  of  equity  the  power  to 
enforce  the  same.""^' 

The  question,  therefore,  whether  equitable  liens  can 
exist  and  be  enforced  in  Louisiana  by  the  Federal 
Courts,  notwithstanding  its  restrictive  law  of  privileges, 
is  still  an  open  one. 

This  question  of  the  jurisdictional  power  of  the 
Federal  Courts  to  recognize  and  apply  the  liens  in 
equity  in  cases  where  the  statutory  law  of  the  States 
forbids  the  recognition  of  them  is  of  such  paramount 
importance  in  this  country  that  I  think  proper  to  pro- 
duce at  the  end.  of  the  bookf  the  argument  and 
authorities  presented  in  the  Louisiana  case  referred  to 
above,  by  the  Counsel  on  both  sides,  who  discussed 
the  question  with  remarkable  ability. 


*  Burdon  Sugar  Refining  Co.  vs.  Payne,  167  U.  S.  127. 
t  See  page  529. 


CHAPTER   XLVII. 

564.  It  must  not  be  supposed  from  what  precedes 
that  the  courts  of  Louisiana  have  no  equity  jurisdic- 
tion, and  that  the  doctrine  of  equity  is  not  recog- 
nized in  that  State,  although  it  is  not  S3'stematized 
there  as  it  is  in  the  Common  law  States  and  in  England. 
The  Supreme  Court  of  the  United  States  has  said  in 
that  respect :  *' The  equitable  doctrine  upon  which 
the  appellant's  claim  is  founded  undoubtedly  obtains 
in  Louisiana.  It  is  derived  from  the  principles 
of  the  Civil  law,  which  is  the  basis  of  the  Civil  Code 
of  that  State,  and  it  is  supported  by  the  authorities 
cited  from  the  Louisiana  Reports."  ^ 

The  articles  of  the  Civil  Code  of  Louisiana  relative 
to  the  doctrine  of  equity  are  the  following : 

Article  21.  "  In  all  civil  matters,  where  there  is  no 
express  law,  the  judge  is  bound  to  proceed  and  de- 
cide according  to  equity.  To  decide  equitably  an 
appeal  is  to  be  made  to  natural  law  and  reason,  or 
received  usages,  where  positive  law  is  silent." 

From  the  terms  of  this  article  it  is  evident  that  no 
equitable  lien  should  be  recognized  in  Louisiana,  as 
there  is  an  express  law  which  imperatively  limits  the 
existence  of  privileges  to  those  established  by  the 
statute. 

Article  1903.  "The  obligation  of  contracts  extends 
not  only  to   what  is  expressly  stipulated,  but  also  to 

*  Wheeler  vs.  Insurance  Company,  101  U.  S.  443 

519 


520  The  Law  of  Pledge. 

ever}"thing  that  by  law,  equity,  or  custom  is  consid- 
ered as  incidental  to  the  particular  contract  or  neces- 
sary to  carry  it  into  effect/' 

Article  1964.  "  Equity,  usage  and  law  supply  such 
incidents  only  as  the  parties  may  reasonably  be  sup- 
posed to  have  been  silent  upon  Irom  a  knowledge 
that  they  would  be  supplied  from  one  of  these 
sources.'' 

Article  1965.  '•  The  equity  intended  by  this  rule  is 
founded  on  the  Christian  principle  not  to  do  unto 
others  that  which  we  would  not  wish  others  should 
do  unto  us,  and  on  the  moral  maxim  of  the  law  that 
no  one  ought  to  enrich  himself  at  the  expense  of 
another.  When  the  law  of  the  land  and  that  which 
the  parties  have  made  for  themselves  by  their  contract 
are  silent,  courts  must  apply  these  principles  to  de- 
termine what  ought  to  be  incidents  to  a  contract, 
which  are  required  by  equity." 

Those  articles  of  the  Civil  Code  of  Louisiana  are 
not  taken  from  the  Code  Napoleon,  which  is  silent  on 
the  subject  of  Equity,  or  from  Pothier's  great  work 
on  Obligations,  the  source  from  which  the  framers  of 
the  Louisiana  Code  have  largely  drawn,  when  they 
did  not  follow  the  French  Code.  The  principles  thus 
codified  seem  to  be  the  production  of  indigenous 
legislation.  The  lawgivers  of  that  State,  at  the  same 
time  that  they  meant  to  establish,  or  rather  maintain, 
the  Civil  law,  must  have  wished  to  infuse  into  it  the 
doctrine  of  equity,  without  adopting  the  English  sys- 
tem. 


Equitable  Liens  of  the  Common  Law.  521 

565.  The  peculiar  admixtion  of  law  and  equity  in 
Louisiana  has  been  well  explained  by  Mr.  Hennen  in 
his  Digest.      He  states  it  in  the  following  terms : 

"  In  the  jurisprudence  of  this  State  no  distinction 
is  made  between  legal  rights  and  equitable  rights, 
between  legal  injuries  and  equitable  injuries  ;  and  in 
the  administration  of  remedial  justice,  except  so  far 
as  relates  to  the  Federal  Courts  sitting  within  the 
State,  the  modes  of  proceeding  and  granting  relief 
under  the  two  systems  are  blended  in  one,  and  our 
courts  are  at  once  courts  of  equity  and  courts  of  law. 
Thus  they  will  grant  injunctions  to  prevent  waste  or 
irreparable  injury  ;  to  prohibit  the  unauthorized  pub- 
lication of  private  letters  ;  to  suppress  public  or  private 
nuisances,  as  well  in  cases  of  actual  injury  as  in  those 
of  impending  or  probable  mischief  or  inconvenience  ; 
to  restrain  the  undue  exercise  of  a  right  against  con- 
science and  equity ;  and  in  general  to  prevent  any  act 
which,  if  consummated,  would  afford  ground  for 
a  claim  for  damages.  They  allow  a  resort  to  the 
conscience  of  a  party,  and  will  compel  him  to  discover 
on  his  own  oath  facts  within  his  knowledge  material  to 
any  of  the  issues  pending.  They  will  compel  the  surren- 
der of  securities  improperly  retained,  and  grant  relief  in 
cases  of  lost  instruments,  upon  such  conditions  as  to 
operate  a  perfect  indemnity,  by  protecting  the  obligor 
with  adequate  security.  They  will  prevent  a  party 
from  setting  up  a  claim  or  title  that  would  be  against 
conscience,  and  will  bind  him  by  an  equitable  estop- 
pel. They  will  suppl}'  the  imperfect  execution  of 
instruments,   and   shape  them   to  the   true  intent  and 


522  The  Law  of  Pledge. 

meaning  of  the  parties.  They  afford  full  relief  in 
matters  of  account,  and  are  invested  with  a  discre- 
tionary power  ex  officio  to  appoint  auditors  or  experts, 
whenever  it  becomes  necessary  in  the  investigation  of 
long  and  intricate  accounts  ;  and  in  implicated  partner- 
ship concerns,  though  the  right  to  exercise  such  an 
authority  was,  in  some  former  decisions,  questioned, 
yet  the  doctrine  seems  now  settled,  that  under  the 
class  of  those  incidental  powers  necessar}-  to  the 
exercise  of  their  jurisdiction,  although  not  expressly 
given  by  law,  they  will  appoint  receivers  for  the 
settlement  and  liquidation  of  partnership  matters. 
And  in  the  adjustment  of  these  matters  they  will 
compel  the  production  of  books  of  account,  vouchers 
and  other  instruments  whenever,  in  their  investiga- 
tion, such  documents  are  discovered  to  be  necessary, 
and  even  when  in  possession  of  third  persons  not  par- 
ties to  the  suit.  In  the  imputation  of  payments  they 
will,  in  the  silence  of  both  parties,  determine  the  mode 
of  appropriation ;  and,  when  such  imputation  has 
been  made  by  the  creditor,  the  debtor  will  always  be 
protected  against  surprise  as  well  as  fraud.  In  the 
relations  of  principal  and  agent  they  will  generally 
regard  the  latter,  not  as  the  debtor,  but  as  the  trustee 
of  the  former,  and,  treating  the  mandate  as  a  trust, 
they  will  not  permit  the  trustee  to  take  an}-  profit  to 
himself  from  the  concerns  of  his  trust,  but  will  compel 
him  to  hold  on  to  any  advantage  he  may  have  acquired 
for  the  principal  and  to  carry  out  the  object  of  the 
mandate  which  he  has  undertaken  ;  and  in  the  set- 
tlement of  their  accounts  relief  will    be  given   from 


Equitable  Liens  of  the  Common  Law.  523 

fraud,  error  or  omission.  They  will  enforce  the  pay- 
ment of  legacies,  effect  the  partition  of  estates  held  in 
common  and  adjust  disputes  arising  out  of  the  confusion 
of  boundaries.  They  will  apportion  contracts.  They 
proceed  upon  the  maxim  that  Equality  is  Equity,  and 
will  compel  a  contribution  toward  the  discharge  of  a 
common  burden,  as  in  cases  of  general  average.  So 
they  will  abate  legacies.  They  will  open  a  dividend  in 
the  distribution  of  the  assets  of  a  succession  in  favor 
of  creditors  who  have  not  been  paid.  In  like  manner 
they  will  compel  a  contribution  between  co- 
sureties, and  subrogate  the  surety  to  the  benefit 
of  all  the  collateral  securities  of  the  creditor 
upon  payment  to  the  latter,  which  is  regarded  as 
the  sale  of  the  debt  itself;  and,  if  the  creditor 
have  impaired  this  right  of  subrogation,  they 
will  release  the  surety.  They  will  marshal  secur- 
ities and  determine  priority  as  to  contributions, 
and  the  rank  of  different  claimants,  holding  liens  on 
the  same  fund  or  estate.  They  will  decree  an  account 
of  assets  and  a  due  settlement  of  the  estates  of  per- 
sons deceased  or  bankrupt ;  arrest  the  creditors  in 
their  race  of  diligence,  and  force  them  into  the  court, 
where  the  settlement  of  the  estate  is  to  be  made,  to 
litigate  their  claims  together ;  they  regard  the  prop- 
erty of  the  debtor,  under  a  textual  provision  of  the 
law,  as  the  common  pledge  of  his  creditors,  and  view 
with  jealousy  all  causes  of  preference  or  privilege, 
holding  them  to  be  strictissimcE  interpretationis j  and 
in  all  matters  relating  to  the  administration  of  such 
estates,    they  proceed    according  to  the  principles  of 


524  The  Law  of  Pledge. 

equity.  They  enforce  contracts  in  favor  of  third  per- 
sons, beneficially  interested  therein,  and  uphold 
equitable  rights  arisinis^  in  the  other  States.  They 
will  decree  a  specific  performance  of  contracts  respect- 
ing real  estate,  and,  when  called  upon  to  enforce 
a  right  respecting  it,  will  avail  themselves  of  their 
jurisdiction  over  the  persons,  to  do  justice  relative  to 
the  subject  matter,  though  beyond  their  jurisdiction. 
They  will  protect  parties  from  vexatious  litigation  by 
proceedings  analogous  to  those  of  bills  of  interpleader ; 
they  will  provide  for  the  safety'  of  property  in  dispute 
pending  litigation,  and  whenever  it  becomes  necessary 
to  protect  the  interests  of  a  number  of  creditors  con- 
cerned, to  avoid  a  multiplicity  of  suits,  they  resort  to 
proceedings  analogous  to  those  by  which  courts  in 
other  States  have  reached  the  equity  of  such  cases ; 
and,  accordingl}-,  they  will  decree  a  general  adminis- 
tration of  the  funds,  appoint  a  receiver  if  necessary, 
and  make  such  further  order  as  the  exigency  of  the 
case  may  require.  They  in  all  cases  compel  him 
who  seeks  equity  to  do  equity;  and,  in  general,  they 
will  extend  to  parties  litigant  in  the  redress  of  their 
wrongs,  and  in  the  vindication  of  their  rights,  reme- 
dies, plain,  adequate  and  complete.  But  the  equi- 
table powers  of  the  court  can  be  called  forth  only  to 
enforce  clear  and  well  defined  rights.  And,  though 
the  fusion  of  law  and  equity  in  Louisiana  be  com- 
plete, 3'et,  as  we  remarked,  it  is  true  only  in  this 
sense,  that  our  courts  are  generally  competent  to 
afford  such  relief  to  parties,  and  in  cases  properly 
before    them,  as   may  be  obtained   in  a   judicial    pro- 


EQuiTAjjLi:  Liens  of  the  Common  Law.  525 

ceeding,  either  at  law  or  in  chancery,  in  those  States 
which  recognize  the  English  division  of  remedies.  But 
it  does  not  follow  that  all  the  prerogatives  claimed  by 
courts  of  Common  law  and  courts  of  chancery  and  all 
their  artificial  rules  and  peculiar  dogmas  are  to  be 
usurped  in  this  State.  Our  people  have  always 
resisted  the  encroachments  of  foreign  modes  of  pro- 
cedure, and  especially  the  doctrines  and  forms  of 
chancery,  the  exercise  of  which  was  reluctantly  con- 
ceded to  the  Federal  Courts  sitting  in  Louisiana, 
by  a  divided  opinion  of  the  Supreme  Court  of  the 
United  States.  The  popular  and  professional  aver- 
sion to  "  English  fictions  and  the  complicated  and 
artificial  modes  of  proceeding  called  the  chancery 
practice"  will  be  found  reflected  in  a  resolution  of 
the  General  Assembly  instructing  the  Senators  and 
Representatives  of  the  State  in  Congress  to  procure 
an  amendment  to  the  act  of  1824.  That  aversion 
dates  from  the  cession  of  Louisiana  to  the  United 
States,  and  whilst  her  constitutional  and  criminal 
law,  her  commercial  law  and  her  law  of  evi- 
dence have  been  assimilated  to  those  of  her  sister 
States,  the  English  system  of  equity  has  found 
no  foothold  in  her  jurisprudence ;  and  its  exclu- 
sion— not  entrusted  to  ordinary  legislation,  but 
guaranteed  by  the  organic  law — has  been  industriously 
secured  by  the  successive  constitutions  of  181 2,  and 
1845  ^"^^  ^^52-  Nor  has  this  policy  of  the  State 
received  from  her  judiciary  a  reluctant  support;  and, 
in  preserving  our  law  relative  to  real  property  and  its 
tenures  in  its  simplicity,  public  order   has  been  firmly 


526  The  Law  of  Pledge. 

maintained  by  the  courts  against  every  attempt  to 
introduce,  within  our  Hmits,  the  involved  jurispru- 
dence of  the  Common  law  States.* 

566.  Merlin,  one  of  the  greatest  jurisconsults  of 
France,  made  a  pithy  remark  on  the  subject  of  Equity 
when  it  exceeds  its  legitimate  limits.  He  said:  "In 
civil  matters,  where  the  law  is  clear  and  precise,  in 
certain  cases,  it  would  be  impairing  Equity  itself  to 
depart  from  the  law  on  the  pretence  of  softening  or 
modifying  its  provisions  by  the  peculiar  principles  of 
a  greater  Equity.  The  law,  then,  which  is  given  to 
the  judges  to  be  the  immutable  rule  of  their  conduct, 
would  have  nothing  certain,  and  the  people  would  be- 
lieve in  vain  that  the}'  can  safely  rely  upon  it.  It  is  true 
that  we  must,  in  everything,  consider  Equity  particu- 
larly. /;/  omnibus  equitas  maxinie  spectanda .  But 
this  rule  of  law  has  no  application,  as  we  have  said, 
except  in  the  particular  cases  for  which  the  law  has 
not  provided.  When  we  have  to  decide  in  embarrass- 
ing difficulties,  in  order  to  be  just,  we  must  be  equi- 
table ;  but,  except  in  such  cases,  the  Equity  of  the 
law  is  necessarily  paramount. "f 

567.  Chief  Justice  Hale  has  expressed  the  same 
idea  in  fewer  words,  and  said:  "  B}-  the  growth  of 
equity  on  equity,  the  heart  of  the  Common  law  is 
eaten  out,  and  legal  settlements  destroyed." '1 

These  wise  reflections  of  the  great  Civilian  Merlin 
and  of  the    eminent  Chief  Justice  Hale  are  of  them- 


*  Hennen's  Digest,  Vol.  1,  p.  479. 

t  Merlin,  Repertoire,  verho  Equite. 

X  Koscarrick  vs.  Barton,  1  Ca.  in  Ch.  217. 


Equitable  Liens  of  the  Common  Law.  527 

selves  strong  arguments  against  the  encroachments  of 
the  equity  practice,  and  are  condemnatory  of  the 
doctrine  by  which  Hens  in  equity  would  be  recognized 
and  enforced  in  a  State  from  which  the  statutory  law 
expels  them. 


%■ 


SUPREME  COURT  oK  THE  UNITED    S'1"ATE!S. 

OcTOBKU  Term.    1806. 

No.    722. 


"I'HE  BvuuoN  Centkal  Slgar  Refimn<t  Company  et  aJ..'\ 

Appellants.  [ 

versus  f 

Jacob   U.   Payne  r«  o?.,  Appellees.  ! 


■On  a  Certiricate  from  Die  United  States  Circuit  Covrt  of  Ajiji<-til.-<  for  the 

Fifth  Circuit. 


BuiEE    Foii  John  H.  Mukphy,  Intervenok   and  Appellant. 


Statement  op   the  Case. 

n.  M.  Payne.  J.  U.  Payne  and  J.  U.  Payne  &  Co.  were  the  owners 
•of  three  contiguous  plantation.s  iu  St.  Landry  parish.  La.,  known  as 
Barbreck,  St.  Peters  and  Anchorage,  and,  on  June  iU,  I892,  they 
entered  into  a  written  contract  with  L.  Murray  Ferris  and  Wm. 
L.  Ferris,  of  Poughkeepsie,  New  York,  in  which  it  was  recited  that  the 
Messrs.  Ferris  proposed  to  lease  the  sugar  house  on  tlie  Barbreck 
plantation  and  to  pnrdiase  the  crops  of  sugar  cane  to  be  grown  on  the 
three  said  plantations  by  the  said  owners  thereof.  This  dual  purpose 
was  effected  by  the  contract,  which  is  printed  in  full  in  the  record. 
Some  of  the  articles  of  said  contract  refer  to  the  lease  of  the  said  sugar 
house,  others  to  the  purchase  by  the  Messrs.  Ferris  of  the  said  sugar 
cane;  and  in  farther  recognition  of  the  fact,  as  shown  in  the  recital, 
that  two  distinct  contracts— one  of  lease,  the  other  of  sale— were  con- 
tained in  said  instrument  and  contemplated  by  the  parties,  the  last 
article,  in  order  to  fuse  the  two  conti'acts  into  one,  provided  that  said 
contract  was  an  entire  contract,  and  that  each  stipulation  and  obliga- 
tion therein  were  a  part  of  the  consideration  for  every  otlior. 

The  eleventh  article  of  said  contract  fixed  the  price  of  the  cane 
to  be  delivered,  thereunder,  and  the  thirteenth  article  is  as  follows: 

"The  price  of  cane,  as  above  determined,  shall  be  paid  as  follows : 
$2.75  per  ton  shall  be  paid,  every  Monday,  for  the  cane  delivered,  dur- 
529 


530  The  Law  of  Pledge. 

ing  the  preceding  week,  until  the  delivery  is  completed.  The  balance^ 
if  any,  per  ton,  shall  operate  as  a  lien  and  privilege  to  the  full  extent 
of  such  balance  on  the  first  bounty  money  received  by  the  parties  of 
the  second  part  on  sugar  produced  from  cane  ground  at  the  Barbreck 
sugar  house,  and  the  said  parties  of  the  second  part  covenant  and  agree 
to  consecrate  solely  to  the  payment  of  such  balance  all  bounty  pay- 
ments so  received  by  them,  until  the  whole  of  the  said  balance  shall  have 
been  paid." 

Under  article  twenty-four  (24)  of  said  contract  the  said  L.  Murray 
Ferris  and  Wm.  L.  Ferris  transferred  all  their  rights  and  liabilities 
under  said  contract  to  the  Ferris  Sugar  Manufacturing  Company, 
Limited,  a  corporation  organized  under  the   laws  of  Louisiana. 

The  McKinley  tariff  act,  passed  October  1, 1890,  which  provided  for 
a  bounty  to  sugar  producers,  was  repealed,  on  August  28,  1894,  and,  on 
Septembers,  1894,  it  was  stipulated  between  the  parties  to  said  contract 
that  the  provisions  of  Arts.  11  and  13  thereof  should  be  extended  so  as 
to  apply  to  any  bounty  that  might,  thereafter,  be  granted  by  CoHgress  to 
sugars  produced  from  the  crop  of  1894. 

The  Ferris  Sugar  Manufacturing  Company,  Limited,  operated 
the  Barbreck  sugar  house  under  the  terms  of  said  contract  from 
October,  1894,  to  January  4,  1895,  and  the  said  patties  of  the  first 
part,  J.  U.  Payne  &  Co.  et  als.,  sold  and  delivered  to  the 
said  Ferris  Sugar  Manufacturing  Company  during  the  season 
under  said  contract  ten  thousand  three  hundred  and  seventy-seven 
(10,377)  tons  of  cane  gi'own  upon  premises  other  than  those  leased  to 
said  Ferris  Company,  for  which  the  said  Ferris  Company  owed  a 
balance  on  the  purchase  price  of  four  thousand  five  hundred  and  sixty- 
four  73-100  dollars  ($4564.73),  on  the  contract  basis  of  $2.75  a  ton,  and  a 
further  sum  of  six  thousand  tive  hundred  and  seventy-nine  and  30-100 
dollars  ($0579.30),  in  the  event  that  the  bounty  should  be  collected. 

In  the  fall  of  1894,  the  Ferris  Sugar  Manufacturing  Company, 
Limited,  became  heavily  involved,  and,  prior  to  this,  a  number  of  cred- 
itors, among  them  the  Reading  Iron  Company  and  John  H.  Murphy. 
recorded  vendor's  privileges  upon  machinery  sold  by  them  to  the  said 
Ferris  Sugar  Manufacturing  Company,  Limited,  and  erected  by  it  in  the 
said  Barbreck  sugar  house. 

On  January  4,  1895,  upon  application  of  the  Burdon  Central  Sugar 
Eefining  Company,  Limited,  a  corporation  organized  under  the  laws  of 
Xew  York,  and  an  unsecured  creditor  of  the  Ferris  Company  to  the 
extent  of  $40,404.74,  to  the  Circuit  Court  of  the  United  States  for  the 
Eastern  District  of  Louisiana,  the  Ferris  Company  was  placed  in  the 
hands  of  a  receiver.  On  March  25,  1895,  H.  M.  Payne,  J.  U.  Payne 
and  J.  \J.  Payne  &  Co.  filed  a  petit  on  of  intervention  in  this  suit, 
claiming  the  said  balance  of  $4564.73,  and  of  $6579.30,  due  them  for  cane 
sold  and  delivered  to  the  said  Ferris  Company  under  said  contract,  and 
further  claiming  that  both  said  sums  were  secured  by  a  lessor's  privilege 


The  Law  of  Pledge.  531 

on  the  property  of  the  said  Ferris  Company  at  the  said  Barbreck  sugar 
house,  and  that  the  said  latter  sum,  namelj-,  $6579.30,  was  also  secured 
by  an  equitable  lien  on  any  bountj-  that  might,  thereafter,  be  collected 
by  the  receiver. 

The  court  decided  that  the  said  intervenors  were  entitled  to  a  les- 
sor's privilege  upon  the  movable  effects  of  the  said  Ferris  Company  and 
of  third  persons  upon  the  said  leased  premises  to  secure  both  said  sums 
due  for  the  impaid  price  of  the  sugar  cane,  in  addition  to  an  equitable 
lien  on  the  bounty  which  might  be  collected  on  sugars  made  from  cane, 
sold  by  the  said  interveners,  to  secure  the  said  sum  of  $0579.30.  in  pref- 
erence to  all  other  creditors  of  the  said  Ferris  Company. 

From  this  decree  the  said  Burdon  Central  Sugar  Refining  Company, 
complainant,  the  said  Reading  Iron  Company  and  John  H.  Murphy, 
intervenors  in  this  suit,  as  creditors  of  the  said  Ferris  Company  for 
large  amounts,  took  an  appeal  and  made  the  followin;^  assignment  of 
errors : 

'•  1st.  Said  court  erred  in  decreeing  that  said  intervenors,  J.  U.  i'ayne 
et  al..  are  entitled  to  a  privilege  and  right  of  pledge  as  lessors  upon  the 
movable  effects  of  the  defendant  on  the  leased  premises  to  secure  the 
sums  due  said  intervenors  for  cane  sold  and  delivered  by  them  to  said 
defendant,  amounting  to  $4504.73  and  $6579.30. 

"  2.  Said  court  erred  in  decreeing  that  said  intervenors  are  entitled  to 
an  equitable  lien  on  the  bounties  which  may  be  collected  on  sugars 
made  from  cane  belonging  to  said  intervenors  and  taken  off  by  the 
defendant,  or  its  receiver." 

The  case  was  twice  argued  in  the  circuit  court  of  appeals,  the  latter 
time  upon  the  request  of  the  court,  and  the  court,  thereupon,  certified 
the  following  questions : 

"  1.  It  being  shown  that  the  cane  sold  by  appellees,  J.  U.  Payne  & 
Co.  et  als.,  lo  the  Ferris  Sugar  Manufacturing  Company,  Limited,  pur- 
suant to  the  contract  between  the  parties,  was  grown  on  lands  not 
embraced  within  the  limits  of  the  premises  leased  to  the  Ferris  Sugar 
Manufaciuring  Company,  Limited,  are  appellees,  under  the  laws  of 
Louisiana,  considered,  in  connection  with  the  jirovisions  of  the  con- 
tract, entitled  to  the  lessor's  privilege  to  secure  the  payment  of  the  pur- 
chase price  of  such  cane? 

"2.  Lender  the  terms  of  the  13th  article  of  the  contract  between  the 
Paynes  and  the  Ferrises,  and  to  secure  the  payment  of  the  price  of  the 
.sugar  cane,  sold  and  delivered  under  said  contract,  have  the  appellees, 
H.  M.  Payne,  J.  U.  Payne  and  the  members  of  the  firm  of  J.  U.  Payne 
&  Co.,  an  equitable  lien  upon  the  bounty  money  collected  from  the 
United  States  by  the  receiver  in  this  suit? 

"3.  If  the  second  question  shall  be  answered  in  the  atiirmalivc.  can 
such  equitable  lien,  under  the  laws  of  Louisiana,  be  so  enforced  in  the 
present  suit  as  to  apiirojiriatc  tlic  bounty  money  to  the  payment  of  the 


532        '  Thk  Law  of  Pledge. 

claim  of  the  Paynes  to  the    exclusion   of   the    general  creditors  of    the 
Ferris  Sugar  Manufacturing  Company?"  " 

Third  (Question. 

We  sluill  reverse  the  order  of  discussion  of  the  second  and  third 
questions  because  it  can  make  no  difference  whether,  according  to  the 
general  principles  of  equity  jurisprudence,  the  Paynes  have  an  equi- 
table lien  on  the  bounty  money  or  not,  under  the  thirteenth  article  of 
the  contract,  if  such  a  lien  is  denied  by  the  statute  laws  of  Louisiana, 
by  which  law  the  federal  court  must  be  governed  in  this  case.  The  nat- 
ural, necessary  and  primarj'  in(^uiry  is,  what  is  the  Louisiana  law?  We 
are  prepared  to  show  that,  even  under  the  general  principles  of  equity 
jurisprudence,  the  Paynes  have  no  equitable  lien  on  the  bounty  money, 
but  we  shall  now  address  ourselves  to  the  proposition  that  an  equitable 
lien,  such  as  is  claimed  by  the  Paynes  in  this  case,  is  forbidden  by  the 
laws  of  Louisiana,  and  expressly  denied  by  a  recent  decision  of  the 
Supreme  Court  of  Louisiana,  and  to  the  further  proposition  tliat  a 
federal  court  of  equity  must  in  this  case  follow  the  Louisiana  statute 
law,  granting  for  the  sake  of  the  argument,  that  the  equitable  lien, 
contended  for  in  this  case,  is  allowed  by  the  general  principles  of  equity 
jurisprudence. 

Firi<t. 

I. 

The  Revised  Civil  Code  of  Louisiana  contains  the  four  following  con- 
secutive articles : 

*  The  Supreme  Court  answered  the  lirst  question  in  the  negative,  deny- 
ing the  asserted  lessor's  privilege,  and  the  second  and  third  in  the 
affirmative,  on  the  ground  that  the  language  used  created  an  equitable 
lien  on  the  bounty  collected,  under  the  general  principles  of  equity 
jurisprudence;  that  the  sugar  bounty  arose  from  an  act  of  Congress, 
which  created  a  link  between  the  manufacturer  of  the  sugar  and  the 
grower  of  the  cane  from  which  it  was  manufactured;  and  i hat  in  this 
case  State  laws  could  not  operate  upon  the  transaction  to  the  extent  of 
destroying  the  statutory  link  and  thus  nullify  the  intention  of  Con- 
gress. As  to  whether  or  not,  as  a  general  proposition,  federal  courts  of 
equity,  in  matters  of  substantive  law,  where  their  jurisdiction  is  con- 
current with  State  courts,  and  where  no  federal  question  is  involved, 
are  bound  by  State  laws,  the  court  reserved  its  opinion.  An  elaborate 
statement  of  the  facts  will  be  found  in  1G7  U.  S.  127,  where  the  case  is 
reported.  The  portion  of  the  brief  discussing  the  lessor's  privilege,  (he 
first  certified  question,  is  omitted,  as  is  also  that  portion  of  the  discus- 
sion which  attempted  to  show  that  under  the  general  principles  of 
equity  jurisprudence  no  equitable  lien  existed  in  this  case.  The  above 
statement  of  facts  is  reprinted  from  the  brief,  and  there  follows  that 
pait  of  it  which  undertakes  to  prove  that  a  lien  such  as  was  claimed  in 
this  case,  is  forbidden  by  the  Louisiana  law,  and  that  a  federal  court  of 
equily,  sitting  in  Louisiana,  is  bound  by  the  Louisiana  law,  even  if 
under  the  general  principles  of  equity  jurisiirudence  an  equitable  lien 
would  have  been  allowed  rAvTiiou.] 


The  J.aw  of  Pledge.  533 

Ari.  3183  (3150).  The  property  of  the  debtor  is  tlie  coininoa  pled^-e 
of  his  creditors,  and  the  proceeds  of  its  sale  must  be  distributed  among 
them  ratably,  unless  there  exist  among  the  creditors  some  lawful  cause 
of  i)reference. 

Art.  3184  (31.51).  Lawful  causes  of  preference  are  privilege  an  i  mort- 
gage. 

Art.  3185  (3152).  Privilege  can  be  claimed  only  for  thos-  debts  to 
which  it  is  expressly  granted  in  this  Code. 

Art.  3186  (31.53).  Privilege  is  a  right,  whii-h  the  nature  of  a  debt  gives 
to  a  creditor,  and  whi(!h  entitles  liim  to  be  preferred  before  other  cred- 
itors, even  those  who  have  mortgages. 

Tiiese  four  articles  follow  in  logical  order.  The  first  announces  the 
principle  that  there  must  be  a  ratable  distribution  of  a  debtor's  prop- 
erty among  his  creditors,  imless  there  are  lawful  causes  of  preference; 
the  second  defines  lawful  causes  of  preference  to  be  privilege  and  mort- 
gage; the  third  restricts  privileges  to  those  debts  to  which  the  Coic 
expressly  grants  them;  the  fourth  excludes  the  idea  of  a  conventional 
privilege.  These  articles  have  been  repeatedly  applied  by  the  courts 
of  Louisiana,  and  they  are  as  well  established  as  a  uniform  interpreta- 
tion for  many  years  can  make  them. 

Privileges  can  not  be  extended  by  implication  or  analogy ;  they  are 
never  allowed  except  when  expressly  granted  by  law,  and  then  only  by 
virtue  of  an  exact  compliance  with  the  legal  requisites  essential  to  their 
creation  and  existence.  Privileges  can  not  be  created  hy  convention 
between  the  parties  and  must  derive  their  existence  from  the  nature  of 
the  contract  and  from  the  law  applicable  thereto.  PrivUcfiia  sunt 
strictissimoi  intcrpretationis. 

Grant  vs.  Fiol  et  al.,  17  La.  1(12. 

Whatley  v?.  Austin,  Adm..  1  Rob.  22. 

Fish  vs.  Moores,  11  Rob.  2S0. 

The  First  Municipality  vs.  Hall.  2  An.  54'.). 

Lee  vs.  Creditors,  2  An.  602. 

Fontenot  et  al.  vs.  Soileau,  2  An.  774. 

Friend  vs.  Fenner  et  al.,  2  An.  790. 

Shropshire  vs.  Russell,  2  An.  902. 

Stevens  et  al.  vs.  Sawyer  et  al.,  3  An.  42'.i. 

riarned  vs.  Churchman  et  al.,  4  An.  313. 

Cochran  &  Co.  vs.  Walker,  10  An.  431 . 

."Swasey  &  Co.  vs.  Steamer  Montgomery.  12  An.  800. 

Shaw  &  Co.  vs.  Grant,  13  An.  52. 

Martin  vs.  Casey,  15  An.  105. 

Ganse  vs.  Bullard,  16  An.  107. 

Landry  vs.  Blanchard.  10  An.  173. 

••If  privileges  be  stricti  juris,  there  is  still  greater  reason  so  to  con- 
sider them  when  advanced  against  innocent  third  persons."'  Shaw  vs. 
Grant,  13  An.  52. 


534  The  Law  of  Pledge. 

••Privileges  are  s tried  juris,  and  as  against  tliird  persons  must  be 
clearly  and  conclusively  established."  Rochford  vs.  Geraghty.  10 
An.  429. 

The  foUoAVing  extracts  from  two  decisions,  applying  Art.  3183,  may 
be  given : 

"The  propertv  of  the  debtor  is  the  common  pledge  of  his  creditors, 
and  the  right  of  the  creditors  to  sell  it.  and  to  cause  the  proceeds  to  be 
distributed  ratably  among  them,  unless  there  exist  some  lawful  cause 
of  preference,  is  a  necessary  consequence  of  this  principle.  Civil  Code, 
Art.  3150  (R.  C.  C.  3183)."     Larthet  vs.  Hogan  et  al.  1  An.  330. 

"  It  is  urged  by  the  appellants  that  the  property  of  the  debtor  is  the 
common  pledge  of  his  creditors.  C.  C.  3150  (R.  C.  C.  3183).  And 
that  privileges  are  to  be  allowed  only  when  expressly  granted  by  the 
Code.     lb.  3152  (R.  C.  C.  3185).     The  position  is  correct."     *     *     * 

Stevens  vs.  Sawyer,  3  An.  420;  also  see  Owens  vs.  Davis,  15  An.  '24. 
and  Southern  Dry  Dock  Company  vs.  Bayou  Sara  Packet  Co..  '^4 
An.  217. 

II. 

The  agreement  between  J.  U.  Payne  &  Co.  and  the  Messrs.  Ferris 
was,  in  substance,  that  a  future  debt  of  indeterminate  amount  should 
operate  as  a  lien  and  privilege  on  a  fund  to  be,  thereafter,  created. 
There  was  no  assignment  of  this  fund  by  the  debtor  to  the  creditor; 
there  was  no  attempt  nor  intention  to  assign  it,  either  in  whole  or  in 
part.  The  creditor  was  to  have  a  lien  or  privilege  on  it,  but  he  was 
not  to  own  it.  The  debtor  was  to  earn,  represent  and  collect  the 
bounty,  notwithstanding  the  supposed  creation  of  a  lien  on  it. 

That  such  an  arrangement  constitutes  no  pledge  and  gives  rise  to  no 
legal  privilege  under  the  law  of  Louisiana  is  unreservedly  admitted  by 
the  learned  judge  a  quo  in  his  written  opinion  in  this  case  (reported  in 
78  F.  R.,  p.  417),  and  is  not  seriously  denied  by  the  counsel  for  J.  U. 
Payne  &  Co.,  and  in  view  of  this  fact  it  is  not  necessary  to  discuss  at 
any  great  length  the  requisites  of  a  pledge. 

Under  the  Civil  Code  a  debtor  can  not  pledge  a  claim  unless  ••  he  mak- 
a  transfer  of  it  in  the  act  of  pledge  "  ("Art.  315o),  and  unless  further  the 
act  mentions  '•  the  amount  of  the  debt  "  secured  (Art.  3158). 

]^o  transfer  of  the  anticipated  claim  against  the  United  States  was 
made,  and  the  amount  of  the  claim  intended  to  be  secured  was  not 
stated,  even  by  giving  a  maximum  amount.  There  was  no  delivery  of 
the  bounty,  or  of  the  evidence  of  the  right  to  claim  it.  Every  essential 
element  in  the  contract  of  pledge  was  wanting.  The  agreement  did 
not,  therefore,  give  J.  U.  Payne  &  Co.,  as  pledgees,  any  right  of  pref- 
erence over  other  creditors.  The  Supreme  Court  of  Louisiana  has 
expressly  decided  that  an  attempt,  in  every  particular  like  this,  t«> 
pledge  the  bounty  was  ineffectual  and  null. 

"  As  relates  to  the   pledge,  the  facts  are   that  the  mortgagor  bound 


The  Law  of  1*ledue.  535 

herself  to  ]ia>j  the  boimty  of  the  fjovernmcnt  to  the  creditor  immedidleUj  after 
the  receipt  of  the  amount,  'just  as  if  the  bounty  had  been  a  portion  of 
the  proceeds  of  the  crops  of  the  i^lantation.'  The  bounty  was  not  deliv- 
ered at  the  time  the  attempt  was  made  to  pledge  it  as  an  additional 
security  for  the  debt.  It  was  collected  from  the  government  by  the 
syndic,  some  time  after  the  act  of  mortgage  had  been  executed.  It  is 
hardly  necessary  to  cite  authoritj-  in  support  of  the  proposition  that 
delivery  is  an  essential  in  order  to  secure  a  pledge  (save  in  statutorv 
pledges,  not  the  case  here).  The  bounty  was  not  a  portion  of  the  pro- 
ceeds of  the  crop;  it  was  no  part  of  the  crop.  We  know  of  no  princi- 
ple of  interpretation  under  which  it  is  possible  to  hold  that  the  bounty 
was  delivered  as  required,  and  came  within  the  provisions  of  the  statutes 
relative  to  pledge  as  a  security."  Delngny  vs.  Her  Creditors,  iS  An. 
402-93. 

The  Delogny  case  is  identical  with  the  present,  and  establishes  be- 
yond any  possibility  of  a  controversy,  that  no  j)ledge  was  constituted 
by  the  agreement  now  under  consideration.  It  is  even  stronger,  because 
the  mortgagor  bound  herself  to  pay  over  the  bounty  to  the  creditor 
Just  as  if  the  bounty  had  been  a  portion  of  the  proceeds  of  the  crops  of 
the  plantation,  in  order  to  malve  the  obligation  in  the  strongest  possi- 
ble form. 

In  an  earlier  case  the  Supreme  Court  held:  ••  That  the  bare  agreement 
of  the  parties  is  not  equivalent  in  any  case  to  a  fictitious  or  sipnboUcal  de- 
livery "within  the  meaning  of  the  article  requiring  delivery  to  consti- 
tute a  pledge.     Caffin  vs.  Kincan,  7  An.  221. 

That  parties  can  not  create  a,  privilege  on  any  particular  property  by 
contracting  that  a  privilege  shall  exist  on  it,  is  well  settled.  In  a  recent 
case  the  Supreme  Court  of  Louisiana,  commentingon  a  written  stipula- 
tion that  insurance  premiums  should  operate  as  a  privilege  on  certain 
property,  say : 

*  *  *  "  Privileges  being  creatures  of  the  law,  and  not  of  conven- 
tions, the  mere  declarations  in  the  act  that  the  insurance  premiums 
should  hear  a  privilege  on  the  propertj^  are  without  effect."  State  vs. 
Bank,  33  An.  706,  opinion  by  Mr.  Justice  Fenner  of  counsel  for  appellees 
in  this  case. 

And  in  a  later  case  the  same  court  say : 

"  It  needs  no  argument  to  dispose  of  his  pretensions  to  a  privilege 
on  the  buildings  and  improvements  as  a  security  for  his  advances, 
although  such  a  privilege  loas  stipulated  in  his  act  of  pledge  with  Logan. 
The  law'confers  no  such  privilege,  and  none  can  be  enforced.  A  privi- 
lege can  not  be  created  by  convention  between  the  ptai'ties;  it  must  derive 
its  existence^from  the  nature  of  the  contract  and  from  the  law  applica- 
ble thereto."  Citizens  Bank  vs.  Maureaii,  37  An.  861.  Mr.  Justice  Fenner 
concurring. 

It  is  true  that  K.  C.  C.  1338  employs  the  phrase,  '•  the  mortgages, 
liens  and  privileges,"  but  it  is  fair  to  assume  that  the    mortgages,  liens 


53()  The  Law  ok  Pledge. 

and  privileges,  recognized  and  established  by  that   Code  alone,  were  ic 
contemplation  of  it. 

They  are  merely  securities  for  debts  and  accessories  to  principal  con- 
tracts (R.  C.  C.  3278,  32S4).  They  "  can  be  claimed  only  for  those 
debts  to  which  they  are  expressly  granted  in  this  Code  (R.  (.'.  C.  3185). 

"  Their  effect  can  not  be  extended  to  any  cases  not  therein  enumerated^ 
b'j  inference  or  comparison." 

Morris  et  al.  vs.  Lalaurie  et  als..  3'.)  An.  .")3:  Mr.  .Justice  Fenner  con- 
curring. 

While  the  decision  in  Delogny  vs.  Her  Creditors  no  longer  leaves  the 
question  of  the  asserted  equitable  lien  in  this  case  an  open  one,  and, 
while  it  is  perfectly  apparent  that  the  creditor  in  that  case  would  have 
been  in  no  better  position  if  he  had  claimed  an  equitable  lien,  still  appel- 
lees' learned  counsel  argue  that  the  equitable  lien  here  asserted  would 
be  allowed  by  the  Supreme  Court  of  Louisiana,  and  in  support  of  this 
l)rophecy  cite  two  Louisiana  cases,  prior  to  the  Delogny  case.  They 
seem  to  regard  an  equitable  lien  in  a  federal  court  as  a  magic  device 
for  evading  the  IjOtiisiana  law  and  as  a  means  of  accomplishing  by  in- 
direction that  which  the  Code  expressly  forbids.  It  is  idle  for  both 
courts  and  lawyers  to  speculate  as  to  how  a  case  would  have  been  de- 
cided, had  it  been  differently  presented,  and  the  only  guide  is  not  the 
law  as  it  might  have  been,  but  as  it  is.  We  assert  that  equitable  liens, 
either  express  or  implied,  have  never  been  recognized  in  Louisi.ana, 
since,  the  Louisiana  law  is  purely  statutory.,  and  therefore  all  liens  and 
privileges  must  be  founded  upon  statute.  But  whether  this  broad  pi'op- 
osition  is  correct  or  not,  and  of  it  there  can  not  be  the  slightest  doubt, 
certain  it  is,  that  the  Delogny  case  establishes  be^'ond  the  peradventure 
of  a  doubt  that  the  eipiitable  lien,  or  imperfect  pledge,  or  whatnot, 
asserted  in  this  case,  can  not  be  maintained,  and  that  is  all  with  which 
we  are  at  present  concerned. 

The  two  cases  relied  upon  by  appellees"  learned  counsel  to  support 
the  contention  that  equitable  liens  give  privileges  in  Louisiana  are 
Succession  of  Walsh,  9  An.  543,  and  Webre.  Syndic,  vs.  Beltran  &  Co., 
47  An.  195. 

In  the  Walsh  case  the  facts  were  that  Walsh  left  at  his  death  two 
scrip  certificates  in  an  insurance  compan}',  upon  which  he  owed  the 
company  a  considerable  sum  for  premiums.  These  certificates,  by  an 
express  clause  written  in  them,  were  not  transferable  upon  the  com- 
pany's books,  except  by  its  consent,  and  under  this  restriction  and  under 
its  charter  the  companj'  held  the  certificates  as  collateral  for  any  amount 
that  might  be  due  it  upon  them  for  premiums.  The  assured  reallj- 
made  a  contract  by  which  the  company  was  authorized  to  set  off 
against  him  on  the  amount  due  him  under  the  certificates,  any  amount 
that  he  might  owe  the  company  on  these  certificates  for  premiums. 
The  court  held,  as  it  was  bound  to  hold  under  these  facts,  that  the 
insurance  company   could  not  bo  compelled  to  pay  the  amount  of  its 


The  Law  of  Pledge.  537 

certificates,  unless  it  were   allowed   to  deduct   the   amount  due  it  for 
premiums  upon  them. 

In  the  case  of  Webre,  Syndic,  vs.  Beltran  &  Co.,  A.  J.  Lacaze  made 
a  contract  with  Beltran  &  Co.  to  furnisli  tiim  with  money  and  supplies 
to  the  extent  of  $8000  during  the  season  of  1892,  in  order  to  maiie  a 
crop  of  sugar  and  molasses  on  his  Good  Will  plantation,  and  he 
pledged  his  crop  and  mortgaged  his  plantation  to  secure  said  advances. 
During  1892  R.  Beltran,  of  the  firm  of  Beltran  &  Co.,  and  as  a  part  of 
the  agreement  with  Lacaze,  applied  to  the  United  States  authorities 
(under  the  act  of  Congress  granting  a  bounty  to  the  sugar  producers) 
for  a  license  as  a  producer  of  the  crop  of  that  year  upon  the  Good 
Will  plantation.  The  license  was  issued  to  R.  Beltran,  who  thereby 
became  the  only  person  to  whom  the  bounty  could  be  paid,  since  the 
entire  legal  title  was  vested  in  him.  After  the  cession  of  Lacaze,  Bel- 
tran collected  the  bounty  and  paid  it  over  to  Beltran  &  Co.,  to  be 
applied  on  the  debt  due  them  by  Lacaze,  pursuant  to  a  verbal  contract 
between  them  made  in  1892.  Upon  suit  brought  by  the  syndic  of 
Lacaze  to  recover  this  bounty  from  Beltran  &  Co.,  the  court  held  that 
the  legal  title  to  the  bounty  was  vested  in  Beltran  by  virtue  of  the  fact 
that  the  license  was  in  his  name;  that  the  contract  was  completely 
executed  between  Beltran  and  the  government  by  the  payment  of  the 
bounty  to  him ;  that  in  order  to  obtain  the  benefit  of  the  license 
Lacaze  and  his  syndic  would  have  as  plaintiffs  to  attack  it  and  its 
results;  and  that  the  contract  between  Beltran  &  Co.  and  Lacaze 
authorized  the  application  of  the  bounty  to  the  debt  of  Beltran  &  Co. 

These  cases  are  not  authority  for  the  maintenance  of  an  equitable 
lien  in  Louisiana,  and,  in  passing,  it  may  seem  strange  that,  if  equita- 
ble liens  obtain  in  Louisiana,  no  instances  of  their  enforcement  can  be 
found  in  the  course  of  nearly  one  hundred  years.  It  has  been  urged 
that  privileges  and  mortgages  are  subordinate  to  legal  rights  existing 
on  the  property  before  the  creation  of  the  privilege  or  mortgage,  and 
this  is  perfectly  true;  but  it  must  be  remembered  that  this  subordina- 
tion is  only  to  legal  rights,  and  that  the  specific  equitable  lien  claimed 
in  this  case  gave  no  legal  right  (Delogny  vs.  Her  Creditors,  ante). 

Appellees'  learned  counsel  concede,  as  well  they  might,  that  the  thir- 
teenth article  of  the  contract  gives  no  legal  privilege  under  the  law  of 
Louisiana,  but  argue  that  there  is  no  reason  why  the  contract  should  not 
be  specifically  enforced  under  Arts.  1926  and  1927  of  the  Code.  This 
same  reasoning  would  apply  to  any  imperfect  pledge  or  mortgage,  and 
the  result  would  be  that,  as  soon  as  a  fatal  legal  defect  is  discovered  in 
the  attempted  security,  specific  execution  would  be  invoked.  This 
might  be  convenient  to  the  man  with  the  defective  security,  but  is 
hardly  law.  It  is  urged  that  Arts.  21,  1903,  1904  and  1965  of  the  Code 
establish  a  broad  system  of  equity,  but,  even  if  this  be  true,  it  does  not 
follow  that  a  broad  system  of  equitable  liens  obtains  in  Louisiana. 
Article  21  declares :  -^  In  all  civil  matters,  where  there  is  no  express  law 


538  The  Law  of  Pledge. 

the  judge  is  bound  to  proceed  and  decide  according  to  eqiiitj-.""  Does 
any  one  suppose  that  privileges  in  liOuisiana  are  not  regulated  by  the 
most  minute  provisions ;  which  are  rigidly  scrutinized  by  the  courts? 

Second. 
I. 

The  stipulation  contained  In  the  13th  article  of  the  agreement  be- 
tween Payne  &  Co.  and  the  Messrs.  Ferris  did  not  establish  either  a 
pledge  ov  privilege  in  favor  of  Payne  &  Co.  If  the  parties  were  in  the 
Louisiana  State  courts,  Payne  &  Co.  would  not  be  entitled  to  any  prefer- 
ence, or  priority,  over  other  creditors  in  the  distribution  of  the  bountj' 
money,  which  the  receiver  has  collected.  It  would  be  held  in  these 
courts  that  the  stipulations  In  the  13th  article  created  neither  a  pledge 
nor  a  privilege,  and  that  Payne  &  Co.  would  be  without  any  legal 
right  of  preference  over  other  creditors.  The  fund  would,  therefore,  be 
prorated  among  all  the  creditors 

Notwithstanding  that  this  Avould  be  the  admitted  and  certain  result 
of  a  suit  on  this  contract  in  the  iState  court,  the  learned  judge  a  quo 
reached  the  conclusion  that  Payne  Sc  Co.  would  be  entitled  by  virtue  of 
the  stipulations  in  the  13th  article  to  a  preference  in  the  federal  court, 
sitting  as  a  court  of  equity. 

In  other  words,  an  agreement  which,  under  the  laws  of  Louisiana, 
neither  creates  a  pledge  nor  gives  rise  to  a  privilege,  will  be  given  the 
same  effect  by  the  federal  chancellor  as  if  it  did  create  a  pledge  or  give 
rise  to  a  privilege.  Accordingly  the  creditor,  under  this  agreement, 
will  have  no  preference,  if  his  suit  is  decided  by  a  State  court,  but  w^ill 
have  a  preference,  if  his  suit  is  tried  by  a  federal  court;  that  is,  the  rule 
of  law,  which  determines  the  extent  of  the  creditor's  rights  with  reference 
to  the  common  debtor,  is  different  in  the  federal  court  from  what  it  is  in 
the  State  court.  In  the  State  courts  the  rule  is  that  the  wish,  the  inten  - 
tion,  or  the  attempt  to  create  a  pledge,  amounts  to  nothing,  if  any  of  the 
essential  requisites  to  the  contract  of  pledge  are  actually  lacking  in  the 
transaction.  But,  according  to  the  learned  judge  a  quo,  in  the  federal 
equity  courts  the  mere  expectation,  or  attempt  to  create  a  pledge,  will 
be  regarded  as  actually  creating  a  pledge,  not  only  between  the  parties, 
but  as  to  third  persons,  although  the  transaction  presents  none  of  the 
essential  requisites  of  the  contract  of  pledge,  except  the  bare  consent  to 
create  it  on  the  one  side  and  to  accept  it  on  the  other. 

Under  this  view,  an  intended  and  inchoate  contract  of  pledge  is 
worthless  as  a  pledge  in  the  State  courts,  but  in  the  federal  courts  it  is 
as  valid  and  binding  as  the  most  complete  and  perfect  pledge  would  be. 

If  we  rightly  understand  it,  the  process  of  reasoning  by  which  th<' 
learned  judge  a  quo  reaches  the  conclusion  that  a  federal  equity  court 
■can  hold  that  an  inchoate  and  imperfect  attempt  to  create  a  pledge. 


The  Law  of  Pledge.  539 

though  absolutely  void  under  the  State  laws,  is  absolutelv  valid  in  the 
federal  court,  is,  in  substance,  as  follows : 

1.  The  equity  powers  of  the  federal  courts  can  not  be  limited  or  varied 
by  State  legislation.  For  these  powers  were  conferred  bij  the  constitu- 
tion of  the  United  States,  and  nuist,  therefore,  still  exist  and  be  enforced 
precisely  as  they  were  conferred,  in  178!),  unaffected  and  undiminished 
by  either  State  or  Congressional  legislation. 

2.  It  was  one  of  the  powers  of  courts  of  equity,  in  1789,  to  recognize 
and  enforce  under  the  designation  of  equitable  liens,  any  inchoate  and 
imperfect  attempt  to  create  a  pledge,  and  to  give  the  intended  pledgee 
all  the  rights  of  preference,  which  would  belong  to  the  pledgee  under  a 
regular  and  valid  ])ledgo. 

3.  Therefore,  in  determining,  at  the  present  day,  whether  a  given  trans- 
action does  or  does  not  create  a  pledge,  the  federal  equit}'  courts  are  in 
no  manner  controlled  by  the  laws  of  the  States,  in  which  they  sit,  but 
may  recognize  and  enforce  as  a  pledge,  lien,  or  privilege,  a  contract 
which  the  State  laws  distinctly  declare  to  be  neither  pledge,  lien,  nor 
privilege. 

The  foregoing  propositions  are  necessarily  involved  in  the  reasoning 
by  which  the  learned  judge  a  quo  considered  that  he  was  warranted  and 
required  to  disregard  the  laws  and  jurisprudence  of  the  State  of  Louis- 
iana in  passing  upon  the  question  whether  the  agreement  in  controversy 
gave  rise  to  a  pledge  or  lien  of  any  kind.  This  conclusion  is  fraught  with 
tremendous  and  f;>.r- reaching  consequences  to  the  States  of  this  Cnion, 
and  it  is  beyond  the  power  of  any  man  to  magnify  or  exaggerate  them. 
This  case,  involving  as  it  does  the  question  as  to  whether  there  is  a  uni- 
form system  of  federal  equity  jurisprudence  superior  to  State  statutes,  is 
fully  as  important  as  the  first  case,  in  which  it  was  decided  that  there 
was  no  common  law  of  the  United  States. 

We  believe  that  none  of  the  propositions  stated  are  true  in  such  a 
sense  as  to  susta'.n  the  conclusion  based  on  them,  and  that  the  Supreme 
Court  of  the  United  States  has  frequently  so  decided. 

Before  discussing  this  question,  it  is  necessary  to  make  some  general 
observations  upon  the  nature  of  the  federal  government  and  its  rela- 
tions to  the  State  governments,  and  thus  determine  their  respective 
powers. 

It  is  a  familar  proposition  that  the  confederated  character  of  the 
United  States  government  makes  each  citizen  of  every  State  a  citizen  of 
two  distinct  sovereignties,  and  that  there  exists  an  important  concurrent 
jurisdiction  in  the  federal  and  State  courts.  From  the  existence  of  this 
concurrent  jurisdiction,  it  might  be  inferred  that  the  same  rights  were 
differently  adjudicated  in  the  two  courts,  and  it  becomes  a  question  of 
the  gravest  importance  to  determine  the  points  of  similarity  and  diverg- 
ence between  their  decisions,  both  at  equity  and  common  law.  and  both 
upon  matters  of  practice  and  substantive  law.  This  involves  a  more 
comprehensive  survey  of   the  subject  than  is  necessary  to  sustain  our 


540  The  Law  of  Pledge. 

position,  and  we  shall  limit  the  argument  almost  exL-lusively  to  matters 
of  substantive  law  in  courts  of  equity,  which  necessarily  includes 
matters  of  substantive  law  in  courts  of  common  law,  because  the  reason 
and  extent  of  the  rule  are  the  same  in  both  cases. 

The  federal  government  is  one  of  enumerated  powers,  formed  by  con- 
cessions of  the  sovereign  States  which  compose  it,  embodied  in  the 
federal  constitution,  and  by  the  tenth  amendment,  it  is  provided  that  the 
powers  not  delegated  to  the  United  States  by  the  Constitution,  nor  pro- 
hibited by  it  to  the  States,  are  reserved  to  the  States  respectively,  or  to 
the  people.  It  has  no  authority  whatever  save  as  to  its  delegated 
powers,  and  as  to  these  it  is  supreme.  In  the  States  there  resides  an 
absolute  power  of  legislation,  subject  to  two  restrictions — first,  the  limi- 
tations of  the  federal  constitution;  second,  of  the  State  constitutions; 
and  the  theory  of  the  reserved  powers  of  the  States  is  the  groundwork  of 
our  dual  form  of  government.  Cooley's  Con.  Lim.  (Gth  ed.),  pp.  102  rt 
seq.;  Hare's  Amer.  Con.  Law,  pp.  94  et  seq.  If  it  be  once  conceded  that 
the  powers  of  the  federal  government  are  unlimited,  then  Congress  may 
legislate  on  all  subjects,  and,  being  supreme,  may  annul  any  State  law. 
Congress  has,  however,  no  such  power,  and,  b}'  the  very  terms  of  the 
federal  constitution,  from  which  its  powers  of  legislation  are  derived, 
must  recognize  the  supremacy  of  constitutional  State  laws.  The  federal 
courts  can  have  no  higher  authority  than  Congress,  and  if  Congress  can 
not  alter  or  repeal  the  laws  of  a  State  upon  some  particular  subject 
within  its  legislative  province,  it  follows,  as  a  matter  of  course,  that  the 
courts  are  bound  to  respect  such  laws. 

The  question  in  this  case  simply  boils  down  to  this:  Are  the  provis- 
ions of  the  Civil  Code,  annulling  such  a  contract  as  that  sought  to  be  set 
up  by  the  appellees,  in  conflict  with  the  federal  constitution  or  laws?  If 
they  are,  the  federal  courts  can  disregard  them;  if  they  are  not,  Con- 
gress could  not  alter  them,  much  less  the  federal  courts,  and  any 
attempt  to  do  so  would  be  in  direct  contravention  of  the  tenth  amend- 
ment. 

Some  unnecessary  confusion  has  arisen  in  the  consideration  of  the 
powers  of  federal  courts  of  equity,  by  reason  of  the  fact  that  their 
practice,  save  when  changed  by  federal  statute,  or  by  the  rules  of  the 
federal  courts,  is  required  to  conform  to  the  rules  and  usages  of  courts^ 
of  equity  (  U.  S.  Ji.  S.,  Sec.  913,  and  cases  cited),  which  has  beeninter- 
preted  to  mean  the  procedure  of  the  English  High  Court  of  Chancery, 
in  1789,  and,  hence,  is  necessarily  uniform  in  all  the  States.  Because 
their  practice  must  be  uniform  and  can  not  be  affected  by  State  legisla- 
tion, the  rule  has  been  occasionally  so  loosely  stated  by  text-writers  as 
to  apply  to  questions  of  substantive  law,  though  the  federal  decisions 
are  to  the  contrary.  Thus,  in  the  case  of  N'ooiian  vs.  Lee,  2  Black,  501 . 
it  was  held  that  a  decree  could  not  be  taken  in  a  federal  court  for  the 
deficiency  against  the  debtor  after  selling  the  mortgaged  property,  no 
matter  what  the  State  equity  practice  might  be.     The  learned  judge  a 


The  Law  of  Pledge.  541 

quo  quotes  this  case  in  his  opinion  as  authority  for  the  proposition  that 
the  equity  jurisdiction  of  the  federal  courts  is  derived  from  the  consti- 
tution and  laws  of  the  United  States,  and  that  their  power  and  rules  of 
decisions  are  the  same  in  all  the  States. 

In  this  particular  case,  the  expression,  equity  jurisdiction,  refers  to  a. 
pure  matter  ot  practice,  not  of  substantive  law,  and  in  every  case  it  must 
be  determined  whether  it  relates  to  practice  or  rules  of  substantive  law. 

There  is  no  federal  statute  regulating  the  decisions  of  the  federal 
courts  of  equity  upon  matters  of  substantive  law,  and  the  fact  that,  at 
the  time  of  the  adoption  of  the  federal  constitution,  a  statute  was  enacted, 
requiring  uniformity  in  federal  equity  practice,  is  a  strong  argument  to 
show  that  it  was  never  contemplated  that  the  rules  of  the  substantive 
law  in  each  State,  to  which  that  practice  would  attach,  were  to  be  uni- 
form throughout  the  Union. 

On  the  other  hand,  it  is  argued  that  the  adoption,  at  the  same  time, 
of  a  section  of  the  judiciary  act  (U.  S.  Rev.  Stats.  721),  declaring  "  the 
laws  of  the  several  States  shall  be  regarded  as  rules  of  decision  in  trials 
at  common  law  in  the  courts  of  the  United  States,''  shows  that  it  was 
never  intended  that  federal  courts  of  equity  should  be  bound  by  State 
laws.  This  section  of  the  judiciary  act,  declaring  the  binding  effect  of 
State  laws  upon  federal  courts  of  common  law,  was  simply  declaratory 
of  a  fact,  that  would  have  existed  to  the  same  extent  without  this  dec- 
laration, namely  that  federal  courts,  by  virtue  of  their  constitution 
under  an  instrument  of  limited  powers,  are  bound  to  follow  State  laws 
in  matters  of  concurrent  jurisdiction,  involving  no  federal  question. 
There  is  no  process  of  reasoning  by  which  the  obligation  of  federal 
courts  of  equity  to  follow  State  laws  can  be  differentiated  from  the 
obligation  of  federal  courts  of  common  law  to  follow  State  laws.  The 
Supreme  Court,  from  an  early  date,  has  qualified  its  obligation  to  follow 
State  laws  by  announcing  that  in  matters  of  general  jurisprudence 
either  at  common  law  or  equity,  not  covered  by  local  statutes,  e.  g. 
general  commercial  law,  it  will,  under  no  circumstances,  follow  State 
courts  into  error,  since  both  reason  from  the  same  premises  (Swift  vs. 
Tyson,  16  Pet.  1)  ;  and,  hence,  the  result  has  been  in  a  good  many  cases 
of  this  class,  as  set  forth  in  Holt  on  Concurrent  Jurisdiction,  that  there 
is  one  justice  in  the  federal,  another  in  the  State  courts.  "It  was  in 
maintaining  the  validity  and  enforcing  the  obligation  of  a  negotiable 
instrument  that  the  United  States  Supreme  Court  said :  '  We  will  never 
immolate  truth,  justice  and  the  law  because  a  State  tribunal  has  erected 
the  altar  and  decreed  the  sacrifice.'  "     Dan.  on  Xeg.  Insts.,  Sec.  1800. 

The  question,  how  far  State  laws  and  decisions,  not  in  conflict  with 
the  federal  constitution  or  laws,  are  binding  upon  the  federal  courts, 
has  been  settled  by  a  long  series  of  United  States  Supreme  Court  deci- 
sions, which  are  a  necessary  consequence  of  the  limited  powers  of  the 
federal  government.     (See  infra,  Biinjess  vs.  Seligman,  107  U.  S.,  p.  25). 

The  fallacy,  into  which   the   learned  judge  a  quo  fell,  would  never 


54::  The  Law  of  Pledge. 

have  been  entertained  for  one  minute,  had  not  the  term  "uniform 
equity  jurisdiction"  been  misconstrued,  and  it  is,  therefore,  necessary 
to  critically  examine  its  meaning,  and  thus  see  whether  his  conclusions 
can  be  legitimately  deduced  from  his  premise,  that  federal  equity  jur- 
isdiction (meaning  jurisprudence,  must  be  uniform  in  all  the  States. 
At  the  outset,  it  must  be  remembered  that  equity  consists  of  two  things: 
A  jurisdiction,  a  power  to  hear  and  determine  causes,  and  a  jurispru- 
dence, the  substantive  rules  of  law  enforced.  It  consists  of  a  form,  its 
pleading,  and  a  body,  its  principles.  The  skeleton,  the  procedure,  is  the 
same  in  all  the  States;  but  the  body,  the  substance,  necessarily  varies 
with  the  statutes  of  each  State. 

Prior  to  the  adoption  of  the  federal  constitution,  in  1789,  all  suits, 
both  in  the  thirteen  colonies  and  in  England,  were  classitied  as  either 
common  law  or  equity  (eliminating  admiralty  causes  from  the  discus- 
sion), and  the  nature  of  the  demand  determined  the  forum  in  which  the 
right  must  be  litigated.  Thus,  an  action  on  a  promissory  note,  or  for  dam- 
ages arising  from  a  tort,  was  a  matter  of  common  law  cognizance,  while 
a  suit  for  the  specific  performance  of  a  contract,  or  for  the  enforcement 
of  a  trust,  was  of  equitable  cognizance.  The  two  systems  covered  the 
entire  field  of  juridical  rights  and  remedies,  but  generally  radically  dif- 
fered, both  in  the  nature  of  the  rights  enforced  and  the  remedies  applied. 

It  is  well  to  repeat  that  it  is  provided  by  the  tenth  amendment  that 
the  powers  not  delegated  to  the  United  States  by  the  constitution,  nor 
prohibited  by  it  to  the  States,  are  reserved  to  the  States  respectively, 
or  to  the  people,  and  it  necessarily  follows  from  this  provision  that  the 
States  are  supreme  in  all  those  matters  which  involve  no  federal  ques- 
tion, and  have  the  power  to  enact  such  statutes  in  matters  of  State  law 
and  local  policy  as  may  seem  to  them  best.  Cooley's  Con.  Lim..  Sixth 
Edition,  pp.  20,  21  and  notes. 

The  constitution  provides  that  the  judicial  power  of  the  federal 
courts  shall  extend  to  all  cases  in  law  and  equit}-  arising  in  all  the 
classes  of  cases  in  which  they  have  jurisdiction,  enumerating  them  in 
detail  (Art.  3,  Sec.  2) ;  and  this  provision  is  construed  by  the  learned 
judge  a  quo  to  mean  that  the  rules  of  equity  jurisprudence  then  pre- 
vailing, have  been  stereotyped  by  the  constitution  and  are  insuscept- 
ible of  change  save  by  an  amendment  of  that  instrument.  This  doc- 
trine must  be  deduced  from  this  section  of  the  constitution,  since 
there  is  no  other  source  from  which  it  can  spring.  The  manifest  mean- 
ing of  this  provision  is,  that  the  litigant  shall  have  complete  relief  in 
all  cases  of  federal  cognizance,  whether  his  rights  are  at  law  or  equity, 
and  this  is  the  interpretation  given  to  it  by  Hamilton,  as  shown  by  the 
following  extract  from  the  Federalist,  paper  No.  SO: 

"It  has  also  been  asked,  what  need  of  the  word  '0(iuity?'  What 
equitable  causes  can  grow  out  of  the  constitution  and  laws  of  the 
United  States?  There  is  hardlj^  a  subject  of  litigation  between  indi- 
viduals  which  may  not  involve  those   ingredients  of  fraud,  accident. 


The  Law  of  Pledge.  543 

tni.st,  or  hardship,  which  would  render  the  matter  an  object  of  equi- 
table, rather  than  of  legal  jurisdiction,  as  the  distinction  is  known  and 
established  in  several  of  the  States.  It  is  the  peculiar  province,  for 
instance,  of  a  court  of  equity  to  relieve  against  what  are  called  hard 
bargains;  these  are  contracts  in  which,  though  there  may  have  been 
no  direct  fraud  or  deceit  sufficient  to  invalidate  them  in  a  court  of  law, 
yet  there  maj-  have  been  some  imdue  and  unconscionable  advantage 
taken  of  the  necessities  or  misfortunes  of  one  of  the  parties,  which  a 
court  of  equity  would  not  tolerate.  In  such  cases,  where  foreigners 
were  concerned  on  either  side,  it  would  be  impossible  for  the  federal 
judicatories  to  do  justice  without  an  equitable  as  well  as  a  legal  juris- 
diction. Agreements  to  convey  lands,  claimed  under  the  grants  of 
different  States,  may  afford  another  example  of  the  necessity  of  an 
equitable  jurisdiction  in  the  federal  courts.  This  reasoning  may  not 
be  so  palpable  in  those  States  where  the  formal  and  technical  distinc- 
tion between  law  and  equity  is  not  maintained,  as  in  this  State,  where 
it  is  exemplified  by  every  day's  practice.'" 

If  it  be  true  that  the  then  existing  system  of  equity  jurisprudence 
was  adopted,  why  is  it  not  equally  true  that  the  then  existing  system 
of  law  was  also  adopted,  because  the  provision  extends  to  all  cases  at 
Jaw  and  e'luitj,  and  if  this  be  so,  instead  of  a  government  of  enumerated 
powers,  there  is  one,  the  power  of  which  extends  to  every  subject  of 
jurisprudence,  and  supreme  to  each  State  included  in  the  Union.  This 
construction  would  nullify  the  tenth  amendment  and  violate  the  well- 
known  rule  of  interpretation,  that  effect  must  be  given  to  each  clause 
of  an  instrument.  It  has  been  repeatedly  decided  by  the  Supreme 
Court  of  the  United  States  that  there  is  no  common  law  of  the  United 
States  (Cooley  Con.  Lim.  [Gth  ed.],  p.  30,  note  3,  and  cases  there 
cited),  and  exactly  the  same  arguments  prove  that  there  is  no  uniform 
federal  equity  jurisprudence. 

But  there  is  another  conclusive  objection  to  this  construction.  At  the 
time  of  the  adoption  of  the  federal  constitution,  there  were  thirteen  dis- 
tinct colonies,  with  a  distinct  system  of  law  and  equity  in  each.  In  each 
colony  both  law  and  equity  had  been  modified  by  colonial  statutes  and 
by  colonial  courts,  and  in  no  two  colonies  were  they  the  same.  There- 
fore, to  which  one  of  these  thirteen  distinct  systems  does  the  expression, 
"all  cases  at  law  and  equity,"  refer?  It  manifestly  can  not  refer  to 
them  all,  for  in  that  event  there  could  be  no  uniform  federal  equity 
jurisprudence.  It  is  equally  obvious  that  this  expression  can  not  refer 
to  the  English  syistems  of  law  and  equity;  for  it  is  preposterous  to  sup- 
pose that  the  colonies,  forming  a  national  government,  just  after  they 
had  achieved  their  independence  in  a  war  caused  by  the  unjust  laws  of 
the  mother  country,  wished  to  irrevocably  adopt  both  her  common  law 
and  equity  systems,  or  either.  It  is  true  that  the  common  law  is  the 
basis  of  the  law  in  every  State  save  Louisiana,  but  this  does  not  prove 
that  the  United  States  has  the  same  substratum  of  jurisprudence  as  the 
various  States. 


544  The  Law  of  Pledge. 

Certain  powers  are  conferred  upon  the  federal  courts  wilb  the  rigltt 
to  administer  complete  relief  in  all  those  cases,  and  it  was  never  con- 
templated that  in  matters  of  State  law  and  local  policy  there  should  be 
a  uniform  system  of  federal  jurisprudence,  either  at  law  or  equity.  If 
this  were  so,  the  enumeration  of  granted  powers  has  no  effect,  for  the 
term,  all  cases  in  equity,  extends  to  a  large  and  indefinite  class  of  cases, 
embracing  the  entire  field  of  the  then  existing  equity  jurisprudence. 
To  give  such  a  construction  to  this  clause  would  convert  what  was 
intended  to  be  a  limitation  upon  the  power  of  the  federal  government 
into  an  extension  of  its  power. 

On  the  law  side  there  would  be  a  supreme  and  a  concurrent  jurisdic- 
tion, but  on  the  equity  side  there  would  only  be  a  supreme  jurisdiction 
— supreme  in  the  sense  that  in  the  matters  commonly  called  concurrent, 
none  of  the  equity  rights,  as  existing  in  1789,  can  be  changed  by  the 
States,  and,  as  to  matters  of  exclusive  federal  jurisdiction,  all  cases  in 
equity  are  necessarily  supreme. 

Whenever,  according  to  this  novel  view,  a  man  gets  into  a  federal 
court  of  equity,  he  can  insist  upon  bis  rights  being  adjudicated  exactly  as 
they  would  have  been  in  equity,  in  1789;  but  the  question  at  once  arises: 
In  what  equity — in  which  one  of  the  thirteen  distinct  colonial  sj^stems? 

Xo  federal  decision  has  ever  held  that  there  must  be  a  uniform 
equity  jurisprudence  in  the  federal  courts  throughout  the  United  States, 
and,  had  it  not  been  that  the  meaning  of  jurisdiction  has  been  unfort- 
unately confounded  with  the  meaning  of  jurisprudence,  this  question 
would  never  have  perplexed  any  one. 

The  term  jurisdiction,  in  its  etymological  signification,  means  the 
power  to  declare  the  law,  and  this  signification  corresponds  closely  to 
its  accepted  legal  meaning.  It  has  been  defined  briefly  and  clearly  by 
the  U.  S.  Supreme  Court  in  the  following  words:  ''The  power  to  hear 
and  determine  a  case  is  jurisdiction."  TJ.  S.  vs.  Arredondo  et  al.,  0 
Peters,  G^l,  709. 

In  this  case  the  question  was  as  to  the  power  of  a  federal  court  of 
equity  to  take  cognizance  of  a  land  claim  arising  in  Florida,  and  to  pass 
upon  rights  in  reference  thereto,  which  accrued  under  the  laws  of  the 
Spanish  government  in  force,  prior  to  the  acquisition  of  Florida  by  the 
United  States.  It  was  held  that  the  court  had  jurisdiction — i.  e..  the 
power  to  hear  and  determine  this  cause,  but  that  the  substantive  rights 
in  controversy  must  be  controlled  by  the  Spanish  law. 

Both  the  federal  and  State  laws  fix  the  jurisdiction  of  their  respective 
courts,  and,  from  thne  to  time,  change  the  jurisdiction  of  those  courts. 
The  power  to  hear  and  determine  causes  does  not  mean  that  the  causes 
must  always  be  determined  in  the  same  way,  but  simply  that  an  ade- 
quate machinery  has  been  provided  to  dispose  of  those  causes.  A 
criminal  court  would  have  the  same  jurisdiction  though  the  statutes 
.should  prescribe  that  the  same  state  of  facts  should,  at  one  time,  be 
murder,  at  another  time,  manslaughter,  and.  ;it  another  time,  justifiable 


The  Law  ov  Pledge.  545 

homicide.  A  court  of  probate  would  have  (be  same  jurisdiction,  though, 
at  one  time,  the  statute  should  require  a  will  to  be  executed  in  the  pres- 
ence of  five  witnesses,  and,  at  another  time,  in  the  presence  of  only  two. 
A  court  of  equity  would  have  the  same  jurisdiction,  though,  at  one  time, 
the  statute  of  registry  should  prescribe  that  a  second  mortgagee,  with 
actual  notice  of  a  prior  unrecorded  mortgage,  should  take  subject  to  that 
mortgage,  and,  at  another  time,  that  a  second  mortgagee,  even  with 
actual  linowledgeof  a  prior  unrecorded  mortgage,  should  not  be  affected 
thereby;  though  the  law  of  assignments  should,  at  one  time,  allow 
preferences,  and,  at  another  time,  forbid  them;  though,  at  one  time, 
the  statute  of  frauds  and  perjuries  should  allow  the  specific  performance 
•of  verbal  contracts  for  the  sale  of  real  estate,  and  at  another  time, 
annul  them;  though,  at  one  time,  alimony  should  be  allowed  as  an 
incident  to  a  suit  for  separation  from  bed  and  board,  and,  at  another 
time,  forbidden;  and  though,  at  one  time,  a  trust  in  favor  of  an 
unincorporated  religious  body  should  be  denied  (e.  g.  Mr.  Minor's  famous 
example,  *•'  The  Baptist  Association,  that  for  common  meets  in  Phila- 
delphia '"),  and,  at  another  time,  enforced. 

The  Supreme  Court  of  the  United  States  has  held  repeatedly  that  in 
the  assignment  of  a  cause  in  a  federal  court  to  the  law  or  the  equity 
side  thereof,  the  uniform  test  to  be  applied  is:  How  would  the  cause 
have  been  allotted,  in  1789?  Whether  it  goes  to  the  law  or  equity  side 
is  to  be  determined  by  the  same  criterion  that  obtained,  in  1789,  viz. :  Was 
it  then  a  matter  of  common  law  or  equitable  cognizance  (Mississippi 
Mills  vs.  Cohn,  150  U.  S.  202)  ;  but  after  the  allotment  has  been  made, 
the  substantive  rights  are  to  be  adjudicated  according  to  the  existing 
law  of  the  State  in  which  the  case  arose,  when  no  federal  question  or 
question  of  general  law  is  involved.  The  phrase,  uniform  equit}^  jurisdic- 
tion, means  neither  more  nor  less  than  this,  and  no  federal  court  has 
yet  held  that  there  must  be  a  uniform  equity  jurisprudence  in  all  the 
States,  nor  will  there  ever  be  such  a  decision  under  present  con- 
stitutional restrictions. 

If. 
1. 

It  is  now  necessary  to  examine  the  authorities  and  see  how  far  the 
principles,  which  we  have  attempted  to  deduce  from  the  limited 
powers  of  the  federal  government,  have  been  borne  out  in  practice. 

Pomeroy,  in  his  great  work  on  Equity  Jurisprudence,  says,  in  Vol.  1 
Sec.  297,  in  discussmg  the  substantive  rules  of  law,  applied  by  the 
federal  equity  courts  in  the  various  States: 

'•  In  order  to  prevent  a  misconception  of  the  foregoing  rules  con- 
cerning the  equitable  jurisdiction  of  the  national  courts,  there  is  one 
limitation  which  must  be  constantly  borne  in  mind.  Since  the  original 
jurisdiction  of  the  United  States  courts,  especially  of  the  circuit  courts, 
in  large  m(;asure  depends  upon  the  State  citizenship  of  the  litigant 
parties   as  its  sole  basis,  it  follows  that  in  some  cases  of  ordinary  con- 


54G  The  Law  of  Pledge. 

troversies— in  all  those  which  do  not  directly  arise  under  statutes  of 
Congress  or  provisions  of  the  United  States  Constitution — the  subject 
matter  of  the  suit,  the  primary  rights,  interests  or  estates  to  be  main- 
tained and  protected  are  created  and  regulated  by  State  laws  alone. 
While,  therefore,  it  is  correctly  held  that  the  equitable  jurisdiction  of 
the  national  courts,  their  i^ower  to  entertain  and  decide  equitable  suits 
and  to  grant  the  remedies  properly  belonging  to  a  court  of  equity,  is 
wholly  derived  from  the  constitution  and  laws  of  the  United  States,  and 
is  utterly  unabridged  by  any  State  legislation,  yet,  on  the  other  hand,  the 
primary  rights,  interests  and  estates  lohich  are  dealt  loith  in  such  suits,  and 
are  protected  by  such  remedies,  a,re  within  the  scope  of  State  authority, 
and  may  he  altered,  enlarged  or  restricted  by  State  laics.  The  equitable 
jurisdiction  of  the  national  courts  is  not  directly  affected  by  the  State 
statutes,  but  what  may  be  finally  accomplished  by  the  exercise  of  that 
jurisdiction,  what  estates,  property  rights  and  other  interests  of  the 
litigants  may  be  maintained,  enforced  or  enjoyed  by  its  means,  must 
depend  to  a  great  extent  upon  the  policy  of  legislation  adopted  in  each 
individual  State."' 

This  is  a  true  exposition  of  the  rule,  and  the  one  upon  which  the 
federal  courts  have  consistently  acted.  Pick  up  any  volume  of  United 
States  Supreme  Court  Reports  and  glance  at  the  cases  where  the  juris- 
diction of  the  State  and  federal  courts  is  concurrent,  and  not  involv- 
ing a  matter  of  commercial  law  or  of  general  jurisprudence.  The 
first  question  in  substantially  every  case  is :  What  is  the  State 
law?  A  matter  ceases  to  be  a  matter  of  general  commercial  law,  or 
of  general  jurisprudence,  just  as  soon  as  a  State  legislates  upon  that 
particular  subject,  and  the  federal  courts,  no  matter  whether,  prior  to 
the  enactment  of  the  statute,  their  view  of  the  law  agreed  or  disagreed 
with  that  of  the  State  courts,  are  bound,  thereafter,  to  follow  the 
authoritative  exposition  of  the  State  statute  by  its  highest  court.  Xor 
does  it  follow  that  a  matter  is  a  matter  of  general  jurisprudence  simply 
because  there  is  no  State  statute  on  that  subject.  In  its  nature  it  may 
be  a  matter  of  local  policy,  which  can  and  must  be  regulated  by  the 
decisions  of  each  State,  and  then  the  federal  courts  must  follow  the 
State  decisions. 

The  effect  of  State  laws  and  decisions  upon  the  federal  courts  was 
carefully  considered  in  the  leading  case  of  Burgess  vs.  Seligman,  107  U. 
S.,  p.  20,  a  common  law  case,  and  the  rule  upon  this  subject  was 
restated  after  the  review  of  fifty  United  States  Supreme  Court  decisions, 
many  of  which  were  equity  cases.  The  sources  ot  the  rule,  the  irresist- 
ible logic  of  in  consimili  casii  of  law  un.d  equity  in  the  federal  courts  so 
far  as  obedience  to  State  laws  is  concerned,  and  its  applications  by  the 
federal  courts,  make  it  certain  that  it  was  intended  to  be  a  guide,  both 
iu  common  law  and  equity  cases. 
On  pp.  33  and  34,  the  Court  say : 
"  The  existence  of  two  co-ordinate  jurisdictions  in  the  same  territory 


The  Law  of  Pledge.  547 

is  peculiar,  and  the  results  would  be  anomalous  and  inconvenient  but 
for  the  exercise  of  mutual  respect  and  deference.  Since  the  ordinary 
administration  of  the  law  is  carried  on  by  the  State  courts,  it  necessarily 
happens  that  by  the  course  of  their  decisions  certain  rules  are  estab- 
lished which  become  rules  of  property  and  action  in  the  State,  and  have 
all  the  effect  of  law,  and  which  it  would  be  wrong  to  disturb.  This  is 
especially  true  with  regard  to  the  law  of  real  estate  and  the  construc- 
tion of  State  constitutions  and  statutes.  Such  established  rules  are 
always  regarded  by  the  federal  courts,  no  less  than  by  the  State  courts 
themselves,  as  authoritative  declarations  of  what  the  law  is.  But 
where  the  law  has  not  been  thus  settled,  it  is  the  right  and  duty  of  the 
federal  courts  to  exercise  their  own  judgment;  as  they  also  always  do 
in  reference  to  the  doctrines  of  commercial  law  and  general  jurispru- 
dence. *  *  *  As  this  matter  has  received  our  special  consideration, 
we  have  endeavored  thus  briefly  to  state  our  views  with  distinctness,  in 
order  to  obviate  any  misapprehensions  that  may  arise  from  language 
and  expressions  used  in  pi'evious  decisions.  The  i^rincipal  cases  bear- 
ing upon  the  subject  arc  referred  to  in  the  note,  but  it  is  not  deemed 
necessary  to  discuss  them  in  detail  "  (see  Xote  1). 

This  case  has  been  affirmed  in  Pana  vs.  Bowles,  107  U.  S.,  p.  541, 
where  the  Court  say:  "See  also  Burgess  vs.  Seligman,  ante,  p.  20, 
where  the  question  how  far  the  courts  of  the  United  States  are  bound 
by  the  decisions  of  the  State  courts  is  carefully  re-examined  and  the 
rules  on  the  subject  stated  with  precision."'  And  in  the  following 
cases:  Carroll  Co.  vs.  Smith,  111  U.  S.,  p.  5G3;  Anderson  vs.  Santa 
Anna,  116  U.  S.  3G2;  Bolles  vs.  Brimfield,  120  U.  S.  7G4;  Foisom  vs. 
Township  Ninety-six,  159  U.  S.  025.  See  also  Cooley's  Con.  Lim.  (Gth 
Edition),  pp.  20,  21  and  22  and  notes. 

Federal  courts  always  follow,  in  accordance  with  the  above  stated 
rule,  the  State  laws  and  decisions  governing  descents,  fraudulent  assign- 
ments, taxation,  limitation,  frauds  and  perjuries,  assignments  for 
benefit  of  creditors,  what  the  Supreme  Court  of  the  United  States  des- 
ignates as  "rules  of  pi-operty,"  and  many  other  statutes  and  decisions,- 
all  of  which  are  different  in  every  State.  As  to  assignments,  see  South 
Branch  Lumber  Company  vs.  Ott,  i42  U.  S.,  p.  628,  an  equity  case, 
where  the  Court  say :  "The  question  of  the  construction  and  effect  of 
a  statute  of  a  State  regulating  assignments  for  the  benefit  of  creditors' 
is  a  question  upon  which  the  decisions  of  the  highest  court  of  the  State, 
establishing  a  rule  of  property,  uroof  controlling  authority  in  the  courts 
of  the  United  States."  This  is  n,n  affirmation  in  the  same  words  of  what 
is  said  iu  the  case  of  the  Chicago  Union  Bank  vs.  the  Bank  of  Kansas 
City,  136  U.  S.,  p.  235,  an  equity  case.  In  14S  U.  S.,  May  vs.  Tenney, 
also  an  equity  case,  on  pp.  G4  and  G5,  the  Court  say  : 

"The  decision  in  White  vs.  Cotzhausen,  129  U.  S.  329,  construing  a 
similar  statute  of  Illinois  in  accordance  with  the  decision  of  the 
Supreme  Court  of  that  State,  as  understood  by  this  court,  has,  therefore. 


548  The  Law  of  Pledge. 

no  bearing  upon  the  case  at  bar.  The  fact  that  similar  statutes  are 
allowjd  different  effects  in  different  States  is  immaterial.  As  observed 
by  Mr.  Justice  Field,  speaking  for  this  court:  'The  interpretatiot 
within  the  jurisdiction  of  one  State  becomes  a  part  of  the  law  of  that 
State,  as  much  so  as  if  incorporated  into  the  body  of  it  by  the  Legisla- 
ture. If,  therefore,  different  interpretations  are  given  in  different 
States  to  a  similar  local  law,  that  law  in  effect  becomes  by  the  interpre- 
tations, so  far  as  it  is  a  rule  for  our  action,  a  different  law  in  one  State 
from  what  it  is  in  the  other.'  Christy  vs.  Pridgeon,  4  Wall.  196,  203; 
see  also  Detroit  vs.  Osborne,  135  U.  S.  492." 

How  is  it  possible,  if  the  position  of  the  learned  judge  a  quo  be  cor- 
rect, for  a  federal  court  of  equity  to  recognize  assignments  with  prefer- 
ences in  one  State,  where  they  are  allowed,  and  assignments  without 
preferences  in  another  State  where  they  are  forbidden? 

This  is  certainly  not  uniform  equity  jurisdiction  in  the  sense  that  its 
rules  must  be  exactly  the  same  in  all  the  States.  The  Louisiana  law 
regulates  preferences,  and  the  case  at  bar  comes  within  its  provisions 
on  this  subject. 

Even  the  admiralty  laws,  an  exclusive  branch  of  federal  jurisdiction, 
vary  in  the  several  States,  because  the  admiralty  courts,  under  certain 
restrictions,  enforce  liens  created  by  the  State  laws,  and  yet  admiralty 
jurisdiction  is  the  same  in  all  the  States.  In  the  much  quoted  case  of 
the  Bank  of  Augusta  vs.  Earle,  13  Peters,  510,  it  was  argited  that  the 
contract  was  contrary  to  the  policy  of  the  laws  of  Alabama,  and,  there- 
fore, could  not  be  enforced.     On  page  507  the  court  say  : 

"  When  the  policy  of  a  State  is  thus  manifest  the  courts  of  the  United 
States  would  be  bound  to  notice  it  as  a  part  of  its  code  of  laws,  and  to 
declare  all  contracts  in  the  State  repugnant  to  it  to  be  illegal  and  void.'' 

A  fortiori  does  this  reasoning  apply,  when  a  contract,  like  the  one 
attempted  to  be  set  up  bj^  the  iutervenors,  is  impossible  under  the  State 
laws. 

So  anxious  are  the  federal  courts  to  conform  to  the  substantiTe  rules 
of  law  of  the  various  States,  that  the  Supreme  Court  has  held  in  three 
cases.  Green  vs.  NeaVs  Lessee,  6  Peters,  201,  in  which  the  necessity  for 
such  conformity  is  elaborately  and  convincingly  discussed,  Suydam  vs. 
Williamson,  24  IIoio.  427,  and  Leffingwell  vs.  Warren,  2  Black,  600, 
that  it  will  follow  the  settled  laws  of  property  in  any  State,  although  it 
may  be  thereby  required  to  overrule  its  own  decisions,  which,  when 
rendered,  were  in  accordance  with  the  decisions  of  the  State  courts  at 
that  time.  So  it  appears  that  the  Supreme  Court  has  no  pride  of 
opinion,  when  the  rights  of  the  citizens  of  a  State  demand  that  the  rules 
of  property,  as  administered  in  the  concurrent  jurisdictions,  shall  be  the 
same. 

In  the  case  of  Barrow  vs.  MiUiken,  74  F.  It.  612,  decided,  one  j-ear 
ago,  by  the  same  court,  which  certified  the  instant  case,  an  equitable 
Jien  was  allowed,  and  the  learned"  judge  a  quo  stated  in  his  written 


The  Law  of  Pledge.  549- 

opinion  that  that  case  was  decisive  of  this  one.  The  fact  that  the  judgeg 
of  the  Circuit  Court  of  Appeals  have  doubted  their  own  decision  by  cer- 
tifying the  same  question  to  this  court  is  strongly  persuasive  of  the  fact 
that  they  wish  to  invoke  the  aid  of  this  court  as  a  convenient  means  of 
discarding  error.  In  Green  vs.  NeaVs  Lessee,  supra,  the  court  said : 
"  That  it  would  be  a  strange  perversion  of  principle  if  the  judicial  exposi- 
tion of  State  laws  by  State  tribunals  could  be  disregarded  by  the  federal 
courts." 


The  bill  of  complaint  in  this  case  alleges  that  the  defendant  corpora- 
tion is  insolvent,  and  asks  that  a  receiver  may  be  appointed  in  order  to 
effect  a  ratable  distribution  of  the  defendant's  assets.  The  answer  filed 
by  the  defendant  company  admits  its  insolvency  and  unites  in  the  prayer 
of  the  bill.  Thus,  the  object  of  the  appointment  of  a  receiver  in  this 
cause  was  to  effect  the  same  result  that  would  have  been  attained  by  a 
liquidation  under  the  State  law. 

Independently  of  any  proof  of  insolvency,  Arts.  3183  and 
3184  of  the  Civil  Code  require  a  ratable  distribution  of  the 
debtor's  property.  These  articles  are  si:nply  an  expression  of  the 
fundamental  principle  of  all  systems  of  insolvency  law.  There  is, 
therefore,  but  one  question  in  the  case,  and  that  is,  whether  a  ratable 
distribution  of  the  defendant's  property  is  binding  upon  this  court^ 
unless  lawful  preferences,  recognized  by  the  State  law,  can  be  estab- 
lished. This  question,  like  every  other  -question  of  federal  authority, 
can  be  determined  only  by  a  reference  to  the  federal  constitution  and 
the  decisions  construing  it,  and  by  this  chart  we  must  be  guided.  The 
discussion  of  the  constitutionality  of  State  insolvency  laws  is,  in  our 
opinion,  strictly  analogous  to  the  question  at  issue. 

One  of  the  enumerated  powers  of  Congress  is  the  right  to  establish  a 
uniform  law  of  bankruptcy,  and,  in  the  actual  exercise  of  this  power,  it 
may  override  the  lien  laws  enacted  by  the  various  States.  Now,  it  is 
a  well  settled  rule  of  construction,  that  the  grant  of  a  power  in  an  instru- 
ment, designed  to  confer  limited  powers,  is  an  implied  exclusion  of 
other  powers  of  a  similar  nature.  Therefore,  Congress  is  the  sole 
branch  of  the  federal  government  empowered  to  annul  the  State  lien 
laws,  and  if  Congress  does  not  exercise  its  power,  it  is  competent  to  the 
States  to  establish  laws  of  insolvency,  and  to  regulate  priorities,  when 
there  are  no  insolvency  laws.  The  contention  at  bar  is  that  State  lien 
laws  are  not  only  subject  to  the  supremacy  of  a  national  bankrupt  act, 
but  also  to  the  imputed  p'ower  of  a  federal  chancellor  to  declare  any 
State  lien  law  unconstitutional  when  it  comes  in  conflict  with  an 
equitable  doctrine,  prevailing  in  1789. 

Early  in  the  history  of  our  government,  the  question  arose  as  to 
the  power  of  the  States  to  enact  insolvency  laws,  and  Chief  Justice 
Marshall,  in  the  famous  case  of  Sturges  vs.  Crowninshield,  4  Wheat.  122, 


550  The  Law  of  Pledge. 

held  that  the  grant  to  Congress  of  the  power  to  establish  uniform 
bankruptcy  laws  was  not  incompatible  with  the  passage  of  insolvency 
laws  by  the  States,  not  impairicig  the  obligation  of  contracts,  when  Con- 
gress had  declined  to  exercise  its  power.  This  case  has  become  one  of 
the  landmarks  in  federal  jurisprudence,  and  has  been  reviewed  and 
affirmed  a  score  of  times.  It  follows  that,  if  the  States  have  the  consti- 
tutional right  to  enact  insolvency  laws,  the  federal  courts  must  enforce 
these  laws,  and  allow  or  deny  liens  for  exactly  the  same  causes  that 
would  be  recognized  in  the  State  courts.  It  is  needless  to  quote  many 
federal  decisions  in  support  of  a  proposition  which  none  will  deny,  but 
see  Ogden  vs.  Saunders,  12  Wheat.  213,  where  the  subject  of  State 
insolvency  laws  is  discussed  in  many  phases;  Boyle  vs.  Zacharie,  6 
Pet.  348;  Baldwin  vs.  Hale,  1  Wall.  228;  Gil  man  vs.  Lockwood,  4  Wall. 
409;  Cole  vs.  Cunningham,  133  U.  S.  114;  in  Brown  vs.  Smart,  145 
U.  S.  457,  the  court  say : 

"  The  principles  which  underlie  this  case  are  clearly  established  by 
the  decisions  of  this  court.  So  long  as  there  is  no  national  bankrupt 
act,  each  State  has  full  authority  to  pass  insolvent  laws  binding  persons 
and  property  within  its  jurisdiction,  provided  it  does  not  impair  the 
obligation  of  existing  contracts;  but  a  State  can  not  by  such  a  law  dis- 
charge one  of  its  own  citizens  from  his  contracts  with  citizens  of  other 
States,  though  made  after  the  passage  of  the  law,  unless  thej'^  volun- 
tarily become  parties  to  the  proceedings  in  insolvency.  Sturges  vs. 
Crowninshield,  4  Wheat.  122;  Ogden  vs.  Saunders,  12  Wheat.  213; 
Baldwin  vs.  Hale,  1  Wall.  223;  Oilman  vs.  Lockwood,  4  Wall.  409.  Yet 
EACH  State,  so  long  as  it  does  not  impair  the  obligation  of  anv 

CONTRACT,  HAS  THE  POAVER  BY  GENERAL  LAWS  TO  REGULATE  THE 
CONVEYANCE  AND  DISPOSITION  OF  ALL  PROPERTY,  PERSONAL  OR  REAL, 

W^ITHIN  ITS  LIMITS  AND  JURISDICTION.  Smith  VS.  Union  Bank,  5  Pet. 
518,526;  Crapo  vs.  Kelly,  16  Wall.  610,  630;  Denny  vs.  Bennett,  128 
U.  S.  489,  498;  Walworth  vs.  Harris,  129  U.  S.  355;  Geilinger  vs. 
Philippi,  133  U,  S.  216,  257;  Pullman  Palace  Car  Company  vs.  Penn- 
sylvania, 141  U.  S.  IS,  22."' 

Brown  vs.  Smart,  and  many  other  Supreme  Court  cases,  were 
cited  in  Butler  vs.  Goreley,  14G  TJ.  S.  313,  in  support  of  the  proposition 
that  there  is  no  force  in  the  position  that  a  State  insolvency  law  is  un- 
constitutional. 

All  the  foregoing  cases  are  valuable  because  they  show  that  in  each 
instance  the  federal  courts  enforce  the  State  law  of  liens  exactly  as 
they  find  it,  and  they  all,  by  iuiplication,  necessarily  and  emphatically 
negative  the  id^a  that  there  is  such  a  thing  as  a  uniform  system  of 
federal  equity  jurisprudence,  or  that  there  is  one  set  of  liens  in  the 
State  and  another  In  the  federal  courts.  We  have  quoted  the  equity 
cases  of  Chicago  Union  Bank  vs.  Bank  of  Kansas  City,  136  U.  S.  235; 
Soutli  Branch  Lumber  Company  vs.  Ott,  142  U.  S.  628,  and  May  vs. 
Tenney,  148  U.  S.  64,  in  each  one  of  which  the  federal  courts  followed 


The  Law  of  Pledge.  551 

the  assignment  law  of  the  various  States  in  which  the  cases  arose,  and 
pointed  out  that  this  was  not  uniform  equity  jurisdiction  (t.  c,  jurispru- 
dence). It  is  hardly  necessary  to  add  that  assignment  laws  and  insol- 
vency laws  both  have  the  same  object  in  view— the  distribution  of  a 
■debtor's  assets,  though  the  means  prescribed  are  different. 

In  Bamberger  vs.  Schooltield,  160  U.  S.  149,  the  Court,  through  Mr. 
Justice  White,  again  affirmed  the  rule  enunciated  in  Chicago  Union 
Bank  vs.  Bank  of  Kansas  City,  snp7-a,  and.  in  that  case  enforced  a  prefer- 
ence allowed  under  the  Alabama  law.  It  was  expressly  decided  in  Tua  vs. 
-Carriere,  117  U.  S.  201,  appealed  from  the  Circuit  Court  of  the  United 
.States  for  the  Eastern  District  of  Louisiana,  and  affirmed,  that  the  insol- 
vent laws  of  Louisiana  are  in  force,  and  this  decision  was  followed  in 
Shwartz  et  al.  vs.  H.  B.  Claflin  Company,  60  F.  R.  676.  In  both  these 
cases  attachments  in  the  federal  court  were  dissolved  by  a  cession  in  the 
State  Court.  It  can  hardly  be  questioned  that  a  receivership  of  an  insol- 
vent corporation  in  a  federal  court  is  equivalent  to  a  liquidation  of  an 
insolvent  corporation  in  a  State  Court,  and  there  should  be  the  same 
result  reached  in  both  courts  in  the  distribution  of  assets. 

It  is  a  work  of  supererogation  to  cite  more  federal  cases,  holding  that 
State  lien  laws,  as  applied  to  insolvency  proceedings,  assignment  laws, 
to  the  distribution  of  a  decedent's  assets  and  to  all  other  subjects,  are 
binding  upon  the  federal  courts  both  of  lawandequity,  but,  recognizing 
the  vast  importance  of  principle  involved  in  this  case,  we  desire  to 
quote  the  following  cases  to  show  how  inflexibly  the  rule  has  been 
applied.  The  syllabus  of  Smith  vs.  Union  Bank  of  Georgetown,  5  Pet. 
618,  is : 

"  The  right  of  priority  of  payment  among  creditors  of  an  intestate  depends 
-on  the  laxo  of  the  place  where  the  assets  are  administered,  and  not  on  the 
law  of  the  place  of  the  contract,  or  of  the  domicile  of  the  deceased,  and, 
therefore,  where  administration  was  taken  under  the  laws  of  Maryland, 
of  assets  there,  where  all  debts  are  of  equal  dignity  and  the  intestate 
was  domiciled,  and  owed  a  bond  debt  in  Virginia,  where  bond  debts 
have  a  preference,  held,  that  the  bond  debt  had  no  prior  right  of  pay- 
ment out  of  the  assets  in  Maryland." 

In  Marbury  vs.  Kentucky  Union  Land  Company,  62  Federal  Reporter, 
page  353,  decided  by  the  Circuit  Court  of  Appeals  for  the  Sixth  Circuit, 
the  Court  say : 

"The  last  question  for  our  consideration  is  whether  the  distribution  of 
the  estate  of  the  land  company  shall  be  according  to  the  ordinary  equi- 
table rule,  or  in  accordance  with  the  Kentucky  statute  which  governs 
the  distribution  of  the  estates  of  the  deceased  insolvents." 

After  a  full  discussion  of  the  subject,  the  Court  further  say : 

"  The  distribution  of  the  land  company's  estate  should  be,  therefore, 
in  accordance  with  the  rule  prescribed  by  Sec.  35,  Art.  2  of  chapter  39 
of  the  general  statutes  of  Kentucky,  concerning  estates  of  decedents  '' 
(page  356) . 


552  The  Law  of  Pledge. 

fnEtheridge  vs.  Sperry,  139  U.  S.,  pages 276-7,  the  Court  say: 

"  While  chattel  mortgages  are  instruments  of  general  use,  each  State 
has  a  right  to  determine  for  itself  under  what  circumstances  they  may 
be  executed,  the  extent  of  the  rights  conferred  thereby,  and  the  condi- 
tions of  their  validity.  They  are  instruments  for  the  transfer  of  prop- 
erty, and  the  rules  concerning  the  transfer  of  property  are  primarily,  at 
least,  a  matter  of  State  regulation.  We  are  aware  that  there  is  great 
diversity  in  the  rulings  on  this  question  by  the  courts  of  the  several 
States,  but  whatever  may  be  our  individual  views  as  to  what  the  law 
ought  to  be  in  respect  thereto,  there  is  so  much  of  a  local  nature 
entering  into  chattel  mortgages,  that  this  Court  will  accept  the  settled 
law  of  each  State  as  decisive  in  respect  to  any  case  arising  therein. 
Chicago  Banli  vs.  Kansas  City  Bank,  136  U.  S.  223."' 

This  decision  announces  the  doctrine  that  the  States  can  regulate  the 
disposition  and  conveyance  of  personal  property  in  the  most  emphatic 
manner,  which  is  an  affirmation  in  part  of  the  more  extensive  rule 
quoted  in  Brown  vs.  Smart,  supra. 

We  come  now  to  the  important  case  of  Brine  vs.  Insurance  Company,. 
96  U.  S.,  p.  630,  in  which  the  opinion  was  delivered  by  Mr.  Justice 
Miller,  that  great  expounder  of  constitutional  law.  The  present  Chief 
Justice  of  the  United  States  Supreme  Court  represented  the  appellants, 
and  succeeded  in  reversing  the  lower  Court.  The  question  there  at 
issue  was  as  to  the  binding  effect  of  the  Illinois  statutes  regulating  the 
foreclosure  of  a  mortgage,  upon  a  federal  court  of  equity  sitting  in  that 
State.  The  Court  held  that  these  statutes  were  binding  upon  the 
federal  court,  and  that  all  private  contracts  are  made  with  special 
reference  to  the  laws  af  the  place  where  they  are  made  and  to  be  per- 
formed, and  that  these  laws  are  incorporated  into  the  contract.  Apply- 
ing these  principles  to  the  instant  case,  appellees'  contract  was  made 
subject  to  the  law  of  Louisiana,  by  which  an  equitable  lien  is  expressly 
excluded.  In  Brine  vs.  Insurance  Company  it  was  urged  that  the 
federal  equity  practice  must  be  uniform  in  all  the  States,  and  the 
inference  was  drawn  that  federal  equity  jurisprudence  must  be  uniform. 
Mr.  Justice  Miller  said  that  no  feaeral  decision  had  held  that  equity 
courts  could  deny  substantial  rights  conferred  by  State  statutes.  We 
do  not  believe  in  quoting  copious  extracts  from  opinions,  but  think 
that  the  importance  of  the  principle  involved  in  the  present  case 
justifies  us  in  departing  from  the  rule,  when  a  leading  case  bears 
so  closely  upon  the  discussion  and  presents  the  subject  in  such  a  lucid 
way,  especially  in  view  of  the  fact  that  appellees'  present  contention  is 
reviewed. 

On  pp.  633-4  the  Court  say : 

"It  is  denied  that  these  statutes  are  of  any  force  in  cases  where  the 
decree  of  foreclosure  is  rendered  in  a  court  of  the  United  States,  on  the 
ground  that  the  equity  practice  of  these  courts  is  governed  solely  by 
the  precedents  of  the  English  Chancery  Courts  as  they  existed,  prior  to 


The  Law  of  Pledge.  553 

the  declaration  of  independence,  and  by  such  rales  of  practice  as  have 
been  established  by  the  Supreme  Court  of  the  United  States,  or  adopted 
by  the  circuit  courts  for  their  own  guidance.  And  treating  all  the 
proceedings  subsequent  to  a  decree,  which  are  necessary  for  its 
enforcement,  as  a  matter  of  practice  and  as  belonging  solely  to  the 
course  of  procedure  in  courts  of  equity,  it  is  said  that  not  only  do  the 
manner  of  conducting  the  sale  under  a  decree  of  foreclosure,  and 
all  the  incidents  of  such  a  sale,  come  within  the  rules  of  practice  of  the 
court,  but  that  the  effects  of  such  a  sale,  on  the  rights  acquired  by  the 
purchaser  and  those  of  the  mortgagor,  and  his  subsequent  grantees,  are 
also  mere  matters  of  practice  to  be  regulated  by  the  rules  of  the  court, 
as  found  in  the  sources  we  have  mentioned. 

'•  Oa  the  other  hand,  it  is  said  that  the  effect  of  the  sale  and  convey- 
ance made  by  the  commissioner  is  to  transfer  the  title  of  real  estate 
from  one  person  to  another,  and  that  all  the  means  by  which  the  title 
to  real  property  is  transferred,  whether  by  deed,  by  will,  or  by  judicial 
proceeding,  are  subject  to,  and  may  be  governed  by,  the  legislative  will 
of  the  State  in  which  it  lies,  except  where  the  law  of  the  State  on  that 
subject  impairs  the  obligation  of  a  contract.  And  that  all  the  laws  of 
a  State,  existing  at  the  time  a  mortgage,  or  any  other  contract,  is  made 
which  affect  the  rights  of  the  parties  to  the  contract,  enter  into 
and  become  a  part  of  it,  and  are  obligatory  on  all  courts  which  assume 
to  give  remedy  on  such  contracts. 

''We  are  of  opinion  that  the  propositions  last  mentioned  are  sound; 
and  if  they  are  in  conflict  with  the  general  doctrine  of  the  exemption 
from  State  control  of  the  chancery  practice  of  the  federal  courts,  as 
regards  mere  modes  of  procedure  they  are  of  paramount  force,  and  the 
latter  must  to  that  extent  give  way.  It  would  seem  that  no  argument 
is  necessary  to  establish  the  proposition  that  when  substantial  rights, 
resting  upon  a  statute  which  is  clearly  within  the  legislative  power,, 
come  in  conflict  with  mere  forms  and  modes  of  procedure  in  the 
courts,  the  latter  must  give  way  and  adapt  themselves  to  the  forms  nec- 
essary to  give  effect  to  such  rights.  The  flexibility  of  chancery 
methods,  by  which  it  moulds  its  decrees  so  as  to  give  appropriate  relief 
in  all  cases  within  its  jurisdiction,  enables  it  to  do  this  without  violence 
to  principle.  If  one  or  the  other  must  give  way,  good  sense  unhesi- 
tatingly requires  that  justice  and  posiiive  rights,  founded  both  on  valid 
statutes  and  valid  contracts,  should  not  be  sacrificed  to  mere  questions 
of  mode  and  form. 

"  Let  us  see  if  the  statutes  of  Illinois  on  this  subject  do  confer  posi- 
tive and  substantial  rights  in  this  matter"  (page  634). 

"  It  is  not  denied  that  in  suits  for  foreclosure  in  the  courts  of  that 
State  the  right  to  redeem  within  twelve  months  after  the  sale  under  a 
decree  of  foreclosure  is  a  valid  right,  and  one  which  must  govern  those 
courts. 

"  Nor  is  it  pretended  that  this  court,  or  any  other   federal  court,  caa 


554  The  Law  of  Pledge. 

in  sucb  case  review  a  decree  of  flie  State  co"iirfc  whicli  gives  tbe*' right  to 
redeem.'  Ttiis  is  a  clear  recognition  that  nothing  in  that  statute  is  in 
conflict  with  any  law  of  the  United  States.  If  fliis  be  so,  how  can  a 
•court  whose  functions  rest  solely  in  powers  conferred  by  the  United 
States,  administer  a  different  law  which  is  in  conflict  with  the  right 
in  question?  To  do  so  is  a"t  once  to  introduce'into  the  jurisprudence  of 
the  State  of  Illinois  the  discordant  elements  of  a  sfibstantial  right  which 
Is  protected  in  one  set  of  courts  and  denied  in  the  other,  with  no  superior 
to  decide  which  is  right.  Olcott  vs.  Bynum  et  al.,  17  Wall.  44;  Ex  parte 
McNeil,  13  lb.  236"  (p.  635). 

"But  there  is  another  view  of  the  question  which  is  equally  forci- 
ble, and  which  leads  ta  the  same  result.  All  contracts  between  private 
parties  are  made  with  reference  to  the  law  of  the  place  where  they  are 
made,  or  are  to  be  performed.  Their  construction,  validity,  and  effect, 
are  governed  by  the  place  where  the}'  are  made  and  are  to  be  per- 
formed, if  that  be  the  same  as  it  is  in  this  case.  It  is,  therefore,  said 
that  these  laws  enter  into  and  become  part  of  the  contract  "  (page 
>637). 

'•We  are  not  insensible  to  the  fact  that  the  industry  of  counsel  has 
been  rewarded  by  finding  cases,  even  in  this  court,  in  which  the  prop- 
osition that  the  rules  of  practice  of  the  federal  courts  in  suits  in  equity 
can  not  be  controlled  by  the  laws  of  the  States,  is  expressed  in  terms  so 
emphatic  and  so  general  as  to  seem  to  justify  the  inference  here  urged 
■upon  us.  But  we  do  not  find  that  it  has  been  decided  in  anj*  case  that 
this  principle  has  been  carried  so  far  as  to  deny  to  a  party  in  those 
courts  substantial  rights  conferred  by  the  statute  of  a  State,  or  to  add 
to  or  take  from  a  contract  that  which  is  made  a  part  of  it  \>y  the  law  of 
the  State,  except  where  the  law  impairs  the  obligation  of  a  contract 
previously  made.  And  we  are  of  opinion  that  Mr.  Chief  Jjiistice  Taney 
expressed  truly  the  sentiment  of  the  court  as  it  was  organized  in  the 
case  of  Bronson  vs.  Kinzie,  as  it  is  organized  now,  and  as  the  law  of  the 
•case  is,  when  he  said  that  '  all  future  contracts  would  be  subject  to  such 
provisions,  and  they  would  be  obligatory  upon  the  parties  in  the  courts 
•of  the  United  States,  as  well  as  those  of  the  States  '  '"  (page  639). 

Mr.  Justice  Miller  quotes  approvingly  an  opinion  of  Mr.  Chief  Justice 
1'aney  in  the  extract  just  given,  and  we  now  desire  to  give  an  excerpt 
from  an  opinion  of  that  eminent  Chief  Justice  on  circuit,  in  Maryland, 
which  settles  this  question  of  the  obligation  of  federal  courts  of  equity 
to  follow  the  State  law  in  matters  of  local  policy,  so  far  as  unanswerable 
logic  can  settle  anything. 

The  decision  places  the  law  upon  that  solid  foundation  of  common 
sense  and  justice  from  which  it  can  never  be  dislodged.  We  ask  the 
attention  of  the  court  to  the  argument  of  counsel  for  the  complain- 
ant in  that  case  because  he  pinned  his  faith  to  some  of  the  same  cases, 
upon  which  counsel  for  appellees  in  this  case  rely.  In  that  case  the 
"Complainant  attempted  to  enforce  a  bequest  in  favor  of  a  vague  charity, 


The  Law  of  Pledge.  555 

•and  the  court  held  that  it  was  bound  to  follow  the  Maiyland  decisions, 
which  had  held  such  a  bequest  void. 

"  The  circuit  courts  of  the  United  States  administer  the  laws  of  the 
States  in  which  they  sit,  unless  those  laws  are  in  conflict  with  the  con- 
stitution of  the  United  States,  treaties  or  acts  of  Congress;  and,  as  a 
general  rule,  regard  the  decisions  of  the  highest  judicial  tribunals  of 
the  State  as  conclusive  evidence  of  the  law.  We  do-  not  speak  of  mat- 
ters of  practice,  or  the  forms  of  proceeding;  but  of  decisions  upon 
the  right  or  claim  in  dispute  between  the  parties,  where  that  right 
depends  upon  the  laws  of  the  particular  State. 

The  cases  of  Swift  vs.  Tyson,  IG  Pet.  (41  U.  S-.)  1,  and  Carpenter  vs. 
Providence  Ins.  Co.,  Id.  511,  512,  were  cases  depending  upon  the  usage 
-of  commerce,  and  the  general  principles  of  commercial  law.  And  the 
Supreme  Court  have  always  said  that  in  cases^of  that  description,  where 
the  State  court  does  not  decide  the  case  upon  any  particular  law  of  the 
State  or  established  local  usage,  but  upon,  the  general  principles  of 
commercial  law,  if  it  falls  into  error,  that  erroneous  decision  is  not 
regarded  as  conclusive  evidence  of  the  commercial  law  of  the  State,  and 
will  not  be  followed  as  such  by  the  Supreme  Court.  And  the  reason  of 
.this  distinction  is  obvious.  The  State  court  does  not  decide  in  such 
cases  upon  the  peculiar  laws  and  institutions  of  the  State.  Its  decision, 
therefore,  is  no  evidence  that  any  law  has  been  adopted  by  the  State  in 
-conflict  with  the  general  principles  which  regulate  commercial  con- 
tracts throughout  the  commercial  world. 

So,  too,  as  relates  to  the  jurisdiction,  of  the  circuit  court  sitting  as  a 
court  of  chancery.  It  is  undoubtedly  true,  as  contended  for  in  the 
argument  of  the  complainant,  in  regard  to  equitable  rights,  that  the 
power  of  the  courts  of  chancery  of  the  United  States  is,  under  the  con- 
stitution, to  be  regulated  by  the  law  of  the  English  chancery;  that  is  to 
.sa}%  the  distinction  between  law  and  equity,  as  recognized  in  the  juris- 
prudence of  England,  is  to  be  observed  in  the  courts  of  the  United 
States  in  administering  the  remedy  for  an  existing  right.  The  rule 
<tpplies  to  the  remedy  and  not  to  the  right;  and  it  does  not  follotv,  that 
every  right  given  by  the  English  laio,  and  ichich,  at  the  time  the  constitu- 
tion loas  adopted,  might  have  been  enforced  in  a  court  of  chancery,  can  also 
be  enforced  in  a  court  of  the  United  States;  the  right  must  be  given  by  the 
law  of  the  State,  or  of  the  United  States.  It  is  the  form  of  remedy  for  which 
the  constitution  provides;  and  if  a  complainant  has  no  right,  the  circuit 
^ourt,  sitting  as  a  court  of  chancery,  has  nothing  to  remedy  in  any  form  of 
proceeding. 

In  the  case  before  the  court  the  question  is:  Is  the  bequest  which 
the  complainants  claim  a  valid  one  by  the  laws  of  Maryland?  It  is  a 
question  which,  in  its  nature,  necessarily  depends  upon  the  laws  of  the 
respective  States.  Some  of  the  States  sanction  devices  of  this  descrip- 
tion; some  do  not,  and  undoubtedly  it  depends  upon  every  State  to 
^determine  for  itself,  to  whom  and  in  what  form,  and  by'what  instrument. 


556  The  Law  of  Pledge. 

any  property  within  its  borders  may  pass  by  devise  or  otherwise.  The 
court  of  appeals  in  Maryland  have  decided  that  a  bequest  like  this  is 
void  by  the  laws  of  the  State  and  passes  no  right  to  any  one.  This 
court  is  bound  to  respect  this  as  the  law  of  the  State,  and  if  there  is  no 
right  vested  in  the  complainants  by  this  bequest,  this  court  can  not  cre- 
ate one.  There  is,  therefore,  neither  an  equitable  nor  legal  title  upon 
which  the  powers  of  a  court  of  the  United  States  can  be  called  into 
action,  either  as  a  court  of  equity  or  of  law,  in  behalf  of  these  com- 
plainants. 

This  is  not  a  proceeding  to  appoint  a  trustee  to  execute  a  valid  trust, 
nor,  indeed,  are  there  any  cestuis  que  trustent.  This  doctrine  is  fuUj^ 
maintained  in  the  case  of  Wheeler  vs.  Smith,  9  How.  (50  U.  S.)  55, 
which  was  decided  at  the  last  term  of  the  Supreme  Court.  The  cases 
of  Trustees  of  Philadelphia  Baptist  Association  vs.  Hart's  Executors, 
and  Vidal  vs.  Girard"s  Executors,  were  in  that  case  recognized  as 
depending  upon  the  laws  of  the  respective  States,  and  not  merely  upon 
the  doctrines  of  the  English  chancer\\  The  bill  in  this  case  must, 
therefore,  be  dismissed  with  costs."  Meade  vs.  Beale,  F.  C,  Vol.  16, 
Case  No.  9371,  p.  1283. 

Fortunately,  we  are  not  left  to  conjecture  whether  the  free  grace  of  a 
federal  chancellor,  by  the  potent  magic  of  an  equitable  lien,  can  con- 
vert an  imperfect  pledge,  under  the  Louisiana  law,  into  a  perfect 
pledge,  because  this  question  has  been  set  at  rest  by  the  Supreme  Court 
of  the  United  States,  in  the  case  of  Casey  vs.  Cavaroc,  93  U.  S.  407,  a  case 
involving  exactly  the  same  questions  as  the  one  at  bar,  Avhich  went  up 
from  the  circuit  court  of  the  United  States  for  the  District  of  Louis- 
iana. In  that  case,  the  receiver  of  an  insolvent  bank  filed  a  bill  in 
equity  in  the  federal  court  to  recover  some  securities  which  the  bank, 
prior  to  receivership,  had  attempted  to  pledge,  on  the  ground  that  the 
pledge  was  imperfect  and  conferred  no  right  on  the  pledgee  as  against 
the  other  creditors  of  the  bank.  The  circuit  court  dismissed  the  bill 
and  the  receiver  appealed  and  reversed  the  lower  court.  The  Supreme 
Court  reviewed  the  Louisiana  law  of  pledge  at  great  length  and  the 
decisions  thereunder,  and  concluded  that  the  pledge  was  defective 
under  the  Louisiana  law,  and,  therefore,  could  not  be  recognized  in  the 
federal  court,  by  which  law  that  court  was  governed. 

It  was  urged  in  the  argument  t*hat  a  similar  pledge  had  been  sus- 
tained by  the  Supreme  Court  itself  in  a  case,  going  up  from  New  York. 
Clarke  vs.  Iselin,  21  Wall.  3G0,  and  that  that  decision  was  binding 
upon  the  court.  The  court  stated  in  its  opinion  that  the  New  York 
case  was  governed  by  New  York  law,  where  such  a  pledge  was  valid, 
but  that  the  case  at  bar  was  controlled  by  Louisiana  law,  where  such  a 
pledge  was  invalid.  In  Casey  vs.  Cavaroc,  the  pledgee,  recognizing,  as 
the  pledgee  does  in  this  case,  that  he  could  get  no  comfort  from  Loui- 
siana law,  invoked  the  power  of  equity  to  save  him,  but  equitj'  mocked 
at  him,  and  said,  in  effect:  "  Shall  I,  in  a  matter  of  State  law  and  local 


The  Law  of  Pledge.  557 

policy,  recognize  rights  which  are  denied  to  you  by  the  State  courts?  " 
On  page  491,  the  court  say : 

•'  These  considerations  also  supply  an  answer  to  another  suggestion, 
that  equity  will  consider  as  done  what  the  parties  intended  should  be 
done,  which,  it  is  assumed,  was,  in  this  case,  a  transfer  of  the  title  of 
the  securities.  Equity  will  not  exercise  this  power  when  it  would 
injure  third  persons  who  have  incurred  detriment,  and  acquired  con- 
sequent rights  by  the  acts  that  are  done  Such  detriment  has,  in  the 
view  of  the  law,  been  incurred  in  this  case,  and  such  rights  have,  by 
the  express  letter  of  the  law,  accrued." 

In  the  case  at  bar  all  the  creditors  regarded  the  sugar  bounty  as  a 
<;oramon  fund,  and  their  rights  certainly  accrued  to  subject  it.  The 
court  will  observe  the  exact  parallel  between  this  case  and  the  case  at 
bar.  In  bosh  eases  there  are  insolvent  corporations;  in  both  cases  a 
pledge  is  attempted  prior  to  insolvency,  which  is  invalid  under  the 
Ijouisiana  law,  ia  both  cases  equity  is  called  upon  to  perfect  the 
p'.elge;  in  one  case  equity  declined  to  interfere,  and  if  experience  and 
reason  be  any  guide,  it  will  also  decline  to  interfere  in  this  case. 

Caspy  vs.  Cavaroc  was  a  much  stronger  case  for  equitable  interven- 
tion than  the  present  one;  for,  in  that  case,  nearly  all  the  elements  of  a 
legal  pledge  existed. 

Appellee's  counsel  attempts  to  distinguish  between  an  executed  and 
an  executory  contract  aul  claims  that  a  mere  promise,  though  unac- 
companied by  a  tra!i-?fer  or  an  assignment,  will  invest  a  court  of  equity 
with  power  to  transform  inchoate  rights  into  perfect  equitable  rights, 
and  to  enforce  them  by  appropriate  equitable  remedies,  while  an 
attempted  execution  of  the  contract  by  the  parties  themselves  places 
them  beyond  the  sustaining  grasp  of  the  chancellor's  hand.  Upon 
this  principle  equity  will  not  help  those  who  try  to  help  themselves,  but 
extends  its  favors  solely  to  those  who  promise  and  do  nothing, 
which  is  contrary  to  one  of  its  maxims—"  Vigilautibasnon  dormieiitibus 
<Bquitas  suhvenit.'' 

If,  according  to  this  reasoning,  in  the  case  of  Casey  vs.  Cavaroc,  96 
U.  S.  467,  the  bank  had  promised  to  pledge  its  securities  to  the  Credit 
Mobilier,  Instead  of  actually  attempting  to  pledge  them,  the  Credit 
Mobilier  would  have  had  an  indefeattble  right  to  them  as  against  all 
the  other  creditors  of  the  insolvent  bank. 

Casey  vs.  Cavaroc  was  followed  in  Bidstrup  vs.  Thompson,  4.5  F.  R., 
p.  454.  a  case  decided  b}^  the  circuit  court  for  the  Eastern  District  of 
Louisiana,     In  that  case  the  Louisiana  law  of  pledge  was  applied. 

If  the  so-called  doctrine  of  an  equitable  lien  is  held  to  apply  to  the 
instant  case,  then  it  is  true  that  the  insolvency  laws  of  Louisiana,  and 
the  other  States,  to  the  extent  that  they  govern  preferences,  can  always 
be  defeated,  where  one  creditor  can  get  the  common  debtor  to  make 
him   a   promise,    of  which  a  federal  court  of  equity  will  take  cogni- 


558  The  Law  of  Pledge. 

zance,  to  devote  a  portion  of  his  assets  to  the  payment  of  his  specific- 
debt.     Surely  this  court  must  recoil  from  such  a  consequence. 

We  invite  the  attention  of  the  court  to  the  following  equity  cases,  in. 
each  of  which  the  State  law  was  followed : 

State  Railroad  Tax  Cases,  92  U.  S.,  pp.  575,  G17. 

Van  Rensselaer  vs.  Kearney,  18  U.  S.,  pp.  631.  636  (11  How.  297). 

Carroll  vs.  Safford,  15  U.  S.,  p.  509  (3  How.  441). 

Nesmith  vs.  Sheldon,  17  U.  S.,  p.  417  (7  How.  812). 

Beauregard  vs.  City  of  New  Orleans,  18  How.  497  and  502  (1  Mil- 
ler, 422). 

Davie  vs.  Briggs,  97  U.  S.  028. 

Elmendorf  vs.  Taylor,  6  U.  S.  360  (10  Wheat.  152).  Opinion  deliv- 
ered by  Chief  Justice  Marshall. 

Ridings  vs.  Johnson,  128  U.  S.  212. 

Mellen  vs.  Buckner,  139  U.  S.  388. 

New  Orleans  Bank  vs.  LeBreton,  120  U.  S.  765. 

The  cases  of  Beauregard  vs.  City  of  New  Orleans,  New  Orleans  Bank 
vs.  LeBreton,  Ridings  vs.  Johnson,  and  Mellen  vs.  Buckner,  siipra, 
went  up  from  Louisiana,  and  in  all  these  cases  a  federal  court  of  equity 
enforced  the  Louisiana  law  exactly  as  it  found  it. 

See  also  New  Orleans  Waterworks  Co.  vs.  Southern  Brewery  Co..  36 
F.  R.  833,  where  the  doctrine  was  applied  in  a  novel  but  correct  manner. 


It  has  long  been  settled  that  a  man  neither  gains  nor  loses  anything 
by  going  into  a  federal  court  in  matters  of  concurrent  jurisdiction  in- 
volving questions  of  local  law  and  State  polic\%  and  in  support  of  this 
proposition  we  quote  the  following  extract  from  Ex  parte  McNeil,  13 
Wall.  213,  which  is  also  valuable  because  it  explodes  the  notion  that 
jurisdiction  is  jurisprudence: 

'•It  is  urged  further  that  a  State  law  could  not  g[\e  jurisdiction  to  the 
District  Court.  This  is  true.  A  State  law  can  not  give  jurisdiction  to 
any  federal  court;  but  that  is  not  a  question  in  this  case.  A  State  law 
may  give  a  substantial  right  of  such  a  character  that,  where  there  is 
no  impediment  arising  from  the  residence  of  the  parties,  the  right  may 
be  enforced  in  the  proper  federal  tribunal  whether  it  be  a  court  of 
equity,  of  admiralty,  or  of  common  law.  The  statute  in  such  cases 
does  not  confer  the  jurisdiction  that  exists  already,  and  it  is  invoked  to 
give  effect  to  the  right  by  applying  the  appropriate  remedy.     This 

PRINCIPLE  MAY  BE  LAID  DOWN  AS  AXI05IATIC  IN  OUR  NATIONAL 
JURISPRUDENCE.  A  PARTY  FORFEITS  NOTHING  BY  GOING  INTO  A 
FEDERAL  TRIBUNAL.  JURISDICTION  HAVING  ATTACHED,  HIS  CASE 
IS  TRIED  THERE  UPON  THE  SAME  PRINCIPLES,  AND  ITS  DETERMINA- 
TION   IS    GOVERNED    BY    THE    SAME    CONSIDERATIONS,  AS    IF    IT    HAD 


The  Law  of  Pledge  559 

BEEN     BROUGHT    IN    THE    PROPEll    STATE    TRIBUNAL    OF     THE     SAME 

LOCALITY.  In  no  class  of  cases  has  the  application  of  this  principle 
been  sustained  by  this  court  more  frequently  than  in  those  of  admir- 
alty and  maritime  jurisdiction." 

This  case  was  artirmeJ  in  Cowley  vs.  Xorthern  Pacific  Railroad  Co  , 
159  U.  S.  583,  where  the  court  say,  after  discussing  the  meaning  of 
equitable  jurisdiction : 

''  It  was  also  said  in  Davis  vs.  Gray,  IG  Wall.  203.  231,  that  '  A  party 

BY  GOING  INTO  A  NATIONAL  COURT  DOES  NOT  LOSE  ANY  RIGHT  OK 
APPROPRIATE  REMEDY  OE  WHICH  HE  MIGHT  HAVE  AVAILED  HIM- 
SELF IN  THK    State  courts   of    the  same   locality.      The  wise 

POLICY  OF  the  constitution  GIVES  HIM  A  CHOICE  OF  TRIBU- 
NALS." "  Other  cases  to  the  same  effect  are  Holland  vs.  Challen,  110 
U.  S.  1.5;  Marshall  vs.  Holmes,  141  U.  S.  589.  Johnson  vs.  Waters.  lU 
U.  S.  640;  Arrowsmith  vs.  Gleason.  129  U.  S.  86. 

Should  appellees'  contention  be  sustained,  they  will,  by  a  mere 
choice  of  a  federal  tribunal,  have  deprived  appellants  of  their  un- 
doubted right  in  the  State  courts  to  participate  ratably  in  the  distribu- 
tion of  the  fund. 
In  Lippincott  vs.  Mitchell,  94  U.  S.  770,  the  court  say: 
"This  construction  is  a  rule  of  property  of  the  State,  and  we  are  as 
much  bound  by  it  as  if  it  were  a  part  of  the  statute.     It  is  our  dutt 

TO  APPLY  THE  LAW  OF  THE  STATE  AS  IF  WE  WERE  SITTING  THERE 
AS   A   LOCAL     COURT,   AND     THIS     CASE    WERE    BEFORE    US   AS   SUCH   A 

TRIBUNAL.""  Citing,  Leffingvvell  vs.  Warren,  2  Black,  599;  Olcott  vs. 
Bynum,  17  Wall.  44. 

In  Daniels  vs.  Case,  45  F.  R.  845,  the  court,  af  fer  torcibly  discitssing 
the  binding  effect  of  State  statutes  and  decisions  upon  federal  courts, 
say: 

"  The  plaintiff,  because  of  residing  on  the  west  Jide  ot  Kaw  river, 
with  the  right  to  sue  in  the  United  States  Circuit  Court,  would  have  a 
good  tax  title,  while  a  citizen  of  Missouri,  on  the  east  side  ot  the  river^ 
would  have  no  title.  The,  public  sense  oj  justice  would  challenge  to  the 
death  any  such  rule  of  inequality  .''^ 

III. 

We  now  v/ish  to  briefly  review  some  of  the  authorities,  relied  upon  ay 
appellees. 

It  is  well  to  bear  In  mfnd  In  the  examination  of  cases  the  following 
principle,  enunciated  by  tbe  Circuit  Court  of  Appeals  for  the  Eighth 
Circuit,  in  the  United  States  vs.  Trans-Missouri  Freight  Association,. 
58  F.  R.  73:  "  But  the  language  employed  by  the  courts  in  these  cases 
should  be  read  in  the  light  of  tbe  circumstances  under  which  it  was 
uttered,  and  with  due  reference  to  tlie  point  actually  adjudicated."  In 
the  noted  case  of  Cohens  vs.  Virginia,  6  Wheat.  264,  339,  Chief  Justice 


5G0  The  Law  of  Pledge. 

Marshall  said  with  his  customary  force:  '•  It  is  a  maxim,  not  to  be  dis- 
regarded, that  general  expressions,  in  every  opinion,  are  to  be  taken  in 
•connection  with  the  case  in  which  those  expressions  are  used.  If  they 
^o  beyond  the  case,  they  may  be  respected,  but  ought  not  to  control 
the  judgment  in  a  subsequent  suit,  when  the  very  point  is  presented  for 
decision.  The  reason  of  this  maxim  is  obvious.  The  question  actuallj' 
before  the  court  is  investigated  with  care,  and  considered  in  its  full 
■extent.  Other  principles  which  may  serve  to  Illustrate  it,  are  consid- 
ered in  their  relation  to  the  case  decided,  but  their  possible  bearing  on 
all  other  cases  is  seldom  completely  investigated.""  Also  see  Wambaugh's 
The  Study  of  Cases,  Chap.  II.  Applying  this  principle,  the  cases  cited 
can  not  control  this  case,  unless  tlie  i^oint  actually  decided  was  that 
there  must  be  a  uniform  federal  equity  jurisprudence,  not  jurisdiction, 
and  that  substantive  rights,  denied  by  the  State  statutes,  are  allowed  in 
federal  courts  of  equity.  In  not  one  of  the  cited  cases  was  this  held, 
and,  therefore,  they  are  not  authorities  to  sustain  appellees'  contention. 

The  earliest  case  on  the  subject  is  Robinson  vs.  Campbell,  3  Wheat. 
212.  One  of  the  points  in  that  case  was  whether  an  equitable  title 
could  be  set  up  as  a  defence  in  an  action  of  ejectment,  and  the  court 
held  that  it  could  not  be,  no  matter  what  the  State  practice  was.  The 
syllabus  correctly  expresses  the  decision  on  this  point: 

"To  determine  whether  there  is  plain,  adequate  and  complete  remedy 
at  law,  so  as  to  prevent  a  resort  to  the  equitable  powers  of  the  courts  of 
the  United  States,  reference  must  be  had  to  the  principles  of  the  com- 
mon law  of  England,  and  not  to  the  laws  of  the  State  where  the  Court 
sits. 

''  If  the  State  laws  have  given  a  legal  remedy  founded  on  an  equitable 
title,  the  equity  jurisdiction  of  the  circuit  court  is  not  affected  thereb}'."' 

The  next  case  is  United  States  vs.  Ilowland.  4  AVheat.  lOS. 

In  this  case  it  appears  that  the  United  States  filed  a  bill  of  equity  in 
the  Federal  Circuit  Court  for  ]\Iassachusetts  to  recover  money  due  for 
duties.  The  defendants  demurred  on  the  ground  that  the  case  was  not 
one  of  equitable  cognizance,  as  a  statute  of  Massachusetts  gave  the 
government  the  right  to  proceed  at  law  in  such  cases.  The  lower  court 
sustained  the  demurrer  and  dismissed  the  bill,  but  the  Supreme  Court 
held,  that  under  the  facts  of  the  case  a  trust  existed,  and  an  accounting 
would  be  required,  so  that  the  case  was.  on  general  principles,  one  of 
■equitable  cognizance,  and  that  the  State  law  could  not  vary  the  juris- 
diction in  the  federal  court.  The  case  was  remanded  to  be  proceeded 
with  in  equity.  This  decision,  therefore,  simply  announces  the  proposi- 
tion, that  whether  a  case  shall  be  proceeded  with  at  law  or  in  equity  in 
the  federal  courts  depends  on  general  principles  governing  the  allot- 
ment of  causes  to  the  law  or  equity  side,  prevailing  at  the  time  of  the 
adoption  of  the  federal  constitution,  and  not  on  State  legislation.  The 
expressions  used  by  Chief  Justice  Marshall  must  be  understood  with 
reference  to  the  point  he  was  deciding. 


The  Law  of  Pledge.  561 

In  the  case  of  Neves  vs.  Scott,  13  How.  270,  two  questions  of  general 
•equity  jurisprudence  were  presented,  one  as  to  the  nature  of  an  executed 
trust,  the  other  as  to  who  were  volunteers.  The  court  say :  "  No  ques- 
tion has  arisen  concerning  any  statute  law  op  Georgia,  nor  was  it 
then,  nor  is  it  now,  suggested  that  any  word,  or  phrase,  or  provision  of 
the  articles,  should  bear  any  peculiar  or  technical  meaning,  by  reason  of 
any  local  law  or  custom."  In  that  case  it  was  urged  that  a  decision  of 
the  Supreme  Court  of  Georgia  in  a  similar  case  was  binding  upon  the 
Supreme  Court,  but  the  court  held  that  both  courts  in  a  matter  of  that 
nature  resorted  to  the  decisions  of  the  English  High  Court  of  Chancery, 
and  that  the  decision  of  the  Georgia  court  was  not  binding  upon  it. 

In  the  case  of  Fitch  vs.  Creighton,  24  How.  160.  the  question  at  issue 
was  as  to  the  form  of  procedure,  and  the  court  held  that  according 
to  the  principles  governing  the  allotment  of  causes  in  the  federal 
courts,  it  was  a  proper  case  for  equitable  relief,  and  that  State  statutes 
could  not  change  the  nature  of  federal  remedies. 

The  next  case  is  Payne  vs.  Hook,  7  Wall.  425.  In  that  cas^  a  bill  in 
equity  was  filed  by  a  citizen  of  Virginia  against  the  Public  Administra- 
tor of  Calloway  county,  Mo.,  to  obtain  a  distributive  share  in  an  intes- 
tate estate.  A  demurrer  was  filed  on  the  ground  that  under  a  Missouri 
statute  a  State  chancery  court  would  have  no  jurisdiction  in  such  a  case, 
because  this  branch  of  equitable  jurisdiction  had  been  confided  to  a 
special  probate  court.  The  court  held  that  the  bill  stated  a  proper 
case  for  equitable  relief,  according  to  the  principles,  obtaining  in  17S9, 
and  that  a  federal  court  of  equity  did  not  follow  the  allotment  in  State 
courts,  when  the  assignment  there  conflicted  with  its  fundamental 
principle  of  allotment.  The  lower  court  sustained  the  demurrer,  but 
the  Supreme  Court  reversed  its  decision.  The  right  existed  both  in  the 
State  and  federal  courts,  and  it  was  simply  a  question  as  to  the  forum  in 
which  this  right  should  be  litigated.  Had  the  demurrer  been  sustained, 
this  absurdity  would  have  resulted.  The  right,  sought  to  be  enforced, 
was  equitable,  not  common  law;  hence,  if  equity  had  no  jurisdiction,  a 
litigant  with  an  indisputable  right  could  have  had  no  relief  in  the 
federal  court,  since  in  that  court  all  suits  must  be  allotted  to  either  the 
common  law  or  equity  side.  This  would  have  been  another  of  those 
anomalous  cases,  which  are  a  standing  reproach  to  the  law — a  right 
and  no  remedy. 

In  the  case  of  Fletcher  vs.  Morey,  Federal  Cases,  Ko.  4864,  an  equi- 
table lien  was  enforced  in  Massachusetts.  The  court  held  that  the 
agreement  creating  the  lien  was  valid  between  the  parties  and  not 
prohibited  by  the  laws  of  Massachusetts,  and  that  the  lien  could  be  en- 
forced imder  the  general  equity  jurisdiction  of  a  federal  court  g.s  well 
as  tinder  its  particular  jurisdiction,  conferred  by  the  Bankrupt  Act  of 
1841,  C.  6,  Sec.  8,  thus  placing  its  jurisdiction  upon  a  double  ground. 
The  court  said  that  it  had  yet  to  learn  that  no  equitable  lien  could  exist 
in  Massachusetts,   though  it  was  true  that  no  remedy  (statutory  evi- 


562  The  Law  of  Pledge. 

dently)  had  been  provided  for  its  enforcement  in  tl\e  State  courts.  By- 
reference  to  Jones  on  Liens,  Vol.  1,  Sec.  30,  it  will  be  seen  that  equi- 
table liens  are  enforced  in  the  Massachusetts  State  courts.  But  is  this 
case  authority  for  the  proposition  that  a  right,  denied  in  the  State 
court,  must  be  enforced  in  a  federal  court  of  equity? 

The  learned  judge  a  quo,  in  his  written  opinion,  lays  great  stress  upon 
the  decision  in  Kirby  vs.  Lake  Shore  Railroad  Company,  I2O  U.  S.  130. 
In  that  case,  an  equity  case,  the  only  question  was  as  to  the  time  from 
which  the  statute  of  prescription  ran  in  bar  of  suit,  and  extinctive  pre- 
scription is  the  loss  of  a  remedy. 

The  case  went  up  from  New  York,  and  it  was  argued  that  the  federal 
court  must  adopt  the  New  York  statute  of  limitations,  as  construed  by 
its  highest  courts,  which  was  contrary,  so  it  was  stated  in  argument,  to 
the  uniform  practice  in  the  federal  courts  of  equity,  determined  by 
numerous  federal  decisions.  The  court  held  that  the  construction  of 
the  New  York  statute  was  doubtful;  that  its  equitj' jurisdiction  must  be 
uniform  in  the  several  States,  and  that  it  could  not  change  its  long 
established  rule,  which  was  based  upon  an  ancient  equity  principle. 
The  point  decided  was  that  "  it  is  an  established  rule  of  equity,  as  ad- 
ministered in  the  courts  of  the  United  States,  that  where  relief  is  asked 
on  the  ground  of  actual  fraud,  especially  if  such  fraud  has  been  con- 
cealed, time  will  not  run  in  favor  of  the  defendant  until  the  discovery 
of  the  fraud,  or  until,  with  reasonable  diligence,  it  might  have  been 
discovered"  (p.  136). 

This  case  decided  no  more  and  no  less,  and  certain  it  is  that  the  deci- 
sion was  not  contrary  to  the  State  statute,  since  its  construction  was 
doubtful. 

In  the  case  of  Wagner  vs.  Baird,  7  How.  255,  258,  the  court  say :  "  In 
cases  of  concurrent  jurisdiction,  courts  of  equity  consider  themselves 
bound  by  the  statutes  of  limitation,  which  govern  courts  of  law  in  like 
cases;  and  this  rather  in  obedience  to  the  statutes  than  by  analog}'." 

In  Godden  vs.  Kimmell,  99U.  S.  201,  the  court  say:  "Statutes  of 
limitation  form  part  of  the  legislation  of  every  government,  and  are 
everywhere  regarded  as  conducive  and  even  necessary  to  the  peace  and 
repose  of  society.  When  they  are  addressed  to  courts  of  equity  as  well 
as  to  courts  of  law,  as  they  seem  to  be  in  controversies  of  concurrent 
jurisdiction,  they  are  equally  obligatory  in  both  forums,  as  a  means  of 
promoting  uniformity  of  decision;"  and.  on  page  210,  the  above  pas- 
sage from  Wagner  vs.  Baird  is  quoted  with  approval. 

In  Metropolitan  Bank  vs.  St.  Louis  Dispatch  Company,  149  U.  S.  436, 
448,  the  court  say :  "•Courts  of  equity  in  cases  of  concurrent  jurisdic- 
tion consider  themselves  bound  by  the  statutes  of  limitation  which 
govern  action  at  law;"  citing  Godden  vs.  Kimmell. 

(In  Baker  vs.  Cummings,  1(59  U.  S.  189,  206,  the  court  quoted  with 
approval  the  above  sentence  from  the  Metropolitan  Bank  vs.  St.  Louis 
Dispatch  Company.) 


The  Law  op  Pledge.  563 

In  the  light  of  these  decisions  argument  is  unnecessary  to  prove  that 
federal  courts  of  equity,  in  cases  of  concurrent  jurisdiction,  are  bound 
by  State  statutes  of  limitation,  and  in  the  case  of  Kirby  vs.  Lake  Shore 
Railroad  Company,  the  court,  on  page  138,  announced,  as  settled  law, 
the  proposition  of  the  above  cases.  The  confusion  caused  by  this  case, 
as  by  many  others,  has  arisen  from  failing  to  discriminate  between  the 
point  actually  decided  and  mere  obiter  dicta.  If  this  case  can  be  con- 
strued as  meaning  that  federal  courts  of  equity  in  matters  of  substan- 
tive law  and  concurrent  jurisdiction  are  not  controlled  by  State  laws,  it  is 
in  direct  conflict  with  Brine  vs.  Insurance  Company,  90  U.  <j30,  Meade 
vs.  Beale,  F.  C,  Vol.  16,  Case  No.  9371,  and  Brown  vs.  Smart,  145  U. 
S.  454,  and  a  host  of  other  United  States  Supreme  Court  decisions, 
quoted  sr<pra, which  are  a  necessary  deduction  from  the  limitations  of  the 
federal  constitution  upon  federal  courts. 

In  the  case  of  Gordon  vs.  Hobart,  F.  C,  No.  5609,  another  equity 
case,  it  was  argued  that,  under  the  facts  of  that  case,  the  plaintiffs  had 
a  remedy  at  law  under  the  State  law,  and,  therefore,  could  not  go  into 
a  federal  court  of  equity.  The  court  held  very  properly  that  the  fed- 
eral equity  jurisdiction  must  be  uniform,  and  that  the  fact  that  the 
remedy  in  the  State  court  was  at  law  did  not  prevent  federal  equity 
jurisdiction  from  attaching.  In  the  present  case  it  must  never  be  for- 
gotten that  there  is  no  right  and,  of  course,  no  remedy  in  the  State 
courts,  and  that  the  burden  of  appellees'  song  to  this  court  is,  "  Create 
us  a  right  and  give  us  a  remedy." 

The  case  of  Wheeler  vs.  Insurance  Company,  101  U.  S.,  p.  439,  which 
is  confidently  asserted  to  have  silenced  our  contention,  simply 
holds  that  the  lien,  there  claimed,  is  recognized  by  the  Louisiana 
Code  and  Louisiana  decisions,  and  must  be  admitted  in  a  federal  court 
of  equity.  No  one  can  be  found  to  gainsay  this  indisputable  proposition, 
assuming  that  the  premise  about  the  Louisiana  law  was  correct,  but  how 
is  it  an  authority  for  the  exactly  contrary  position  that  a  right,  unknown 
and  denied  in  Louisiana  courts,  must  still  be  enforced  in  a  federal  court 
of  equity?  From  what  source  do  federal  courts  of  equity  derive  the 
power  to  trample  upon  State  laws,  enacted  in  pursuance  of  their 
reserved  rights,  guaranteed  by  the  federal  constitution?  , 

In  the  case  of  Riddle  vs.  Hudgins,  7  U.  S.  C.  C.  A.  Reports,  p.  335, 
(58  F.  R.  p.  490)  Hudgins  &  Bro.  sold  a  drove  of  cattle  to  Nichols,  in 
Arkansas,  and  it  was  verbally  agreed  that  the  seller  should  have  an 
express  lien  on  the  cattle  for  the  unpaid  purchase  price.  Nichols 
removed  the  cattle  to  the  Choctaw  Nation,  in  Indian  Territory,  and  there 
died.  His  administrator  took  possession  of  over  half  the  cattle,  and 
upon  demand,  made  by  Hudgins  &  Bro.,  refused  to  surrender  the  cattle 
or  to  pay  for  them.  No  other  creditor  of  the  decedent  claimed  then), 
and  upon  a  bill  filed  in  the  federal  court  by  Hudgins  &  Bro.,  it  waa 
decided  that  they  had  a  lien  on  the  cattle  to  secure  their  debt. 
There  is  nothing  in  the  record  to  show  that  this  decision  was  contrary 


564  The  Law  of  Pledge. 

to  a  positive  statute,  and  therefore,  this  case  is  no  authority  for  the  con- 
tention at  bar,  which  is,  that  a  so-called  equitable  lien  can  override  an 
express  State  statute.  This  case  went  up  from  Indian  Territory,  where  a 
territorial  government  existed. 

In  the  case  of  Mississippi  Mills  vs.  Cohn,  150  U.  S.  202,  it  was  held 
that  the  jukisuiction  (not  jurisprudence)  of  federal  courts,  sitting  as 
courts  of  equity,  can  not  be  enlarged  or  diminished  by  State  legislation; 
and  that  whether  a  federal  court  of  equity  has  jurisdiction  over  a  par- 
ticular case  will  be  determined  by  inquiring  whether,  by  the  principles 
of  common  law  and  equity,  as  distinguished  and  defined  in  this  country 
and  the  mother  country,  at  the  time  of  the  adoption  of  the  federal  con- 
stitution, the  relief  sought  in  the  bill  was  one  obtainable  in  a  court  of 
law,  or  one  which  only  a  court  of  equity  was  fully  competent  to  give. 
In  that  case,  a  creditor's  bill  in  a  federal  court  of  equity  was  main- 
tained, though  the  remedy  in  the  State  courts  was  at  law. 

At  this  point  it  would  be,  perhaps,  well  to  state  that,  while  it  is  true 
that  federal  courts  of  equity  enforce  equitable  liens  in  many  of  the 
States,  it  is  also  true  that  in  all  those  States,  State  courts  may,  or  do, 
enforce  similar  liens,  and  we  challenge  the  learned  counsel  for  the 
appellees  to  cite  a  single  federal  authority  holding  that  a  federal 
court  of  equity  can  enforce  an  equitable  lien  in  direct  contravention  of 
a  State  law,  not  in  conflict  with  the  federal  constitution  or  laws. 

IV. 

A  pledge  is  a  right,  not  a  remedy,  and  is  so  defined  by  jurisconsults. 
Markby's  Elements  of  Law,  Ch.  XI;  Sohni's  Institutes  of  Roman  Law, 
Sec.  59;  Holland's  Elements  of  Jurisprudence,  pp.  201-2. 

The  latter,  in  his  classification  of  rights,  speaks  (p.  148)  of  it  as  a 
private,  substantive,  normal,  antecedent  right  in  rem,  and  it  can  not  be 
seriously  contended  that  a  pledge  is  one  of  the  equitable  remedies, 
which  the  federal  constitution  and  laws  are  supposed  to  have  stereotyped. 

Y. 

Assume,  for  the  sake  of  argument,  that  the  constitution  did  adopt  a 
uniform  system  of  federal  equity  jurisprudence,  supposing  that  it  has 
been  satisfactorily  determined  which  of  the  thirteen  colonial  systems  of 
equity  jurisprudence  was  adopted,  and  that  federal  courts  of  equity  are 
exempted  from  any  obligation  to  follow  State  laws  by  virtue  of  any 
constitutional  restrictions  upon  their  powers,  it  is  still  true  that 
the  maxim,  that  equity  follows  the  law,  was  an  integral  part  of 
every  equity  system  at  that  time,  and,  of  course,  was  as  much 
adopted  as  any  other  portion  of  the  system.  Every  text- 
writer  on  equity  treats  of  this  maxim,  and  we  refer  to  Merlin 
on  Equity  and  Equity  Pleading,  Sees.  110  et  seq.;  Spence''s 
Equitable  Jurisdiction,  Vol.  I,  pages  419-20-21 ;  Pomeroy''s  Equity 
Jurisprudence,  Vol.  7,  Sees.  425.  426.  427 :  Fetter  on  Equity,  pp.  33-4, 


The  Law  op  Pledge.  565 

and  note  63,  in  which  a  quaint  but  forcible  decision  of  Sir  Joseph 
Jekyll  is  quoted.  In  that  decision  he  says  that  in  no  case  does  equity 
contradict  or  overturn  the  grounds  of  principles  of  the  law,  as  has  been 
sometimes  ignorantly  imputed  to  it.  This  maxim,  as  applied  to  the 
federal  courts  of  equity,  requires  them  to  conform  to  the  positive 
requirements  of  State  statutes  in  all  matters  not  national  in  character. 
Appellees'  learned  counsel,  at  a  time  when  Ihey  virtually  admitted 
that  they  had  no  rights  in  the  State  courts,  as  shown  by  the  following 
extract  from  a  brief  filed  by  them  in  the  Circuit  Court  of  Appeals  in 
this  case,  and,  when  they  relied  solely  upon  the  supposed  system  of 
uniform  federal  equity  jurisprudence,  argued  that  the  maxim  had  no 
application  to  this  case  : 

•'  The  statutes  of  Louisiana  on  the  subject  of  privileges  or  statutory 
liens  and  the  decisions  of  her  courts  interpreting  those  statutes  are 
ENTIRELY  IMPERTINENT  in  this  case.  They  deal  with  an  entirely  dif- 
ferent subject  from  equitable  liens. 

"Whether  the  law  of  Louisiana  recognizes  or  denies 
equitable  liens  is  a  question  equally  foreign  to  this  case.  the 
only  effect  would  be  to  transfer  the  subject  from  the  exclusive  to  the 
CONCURRENT  equitable  jurisdiction  of  the  court. 

"  If  the  State  law  recognizes  such  liens,  that  would  not  deprive 
this  court  of  the  power  to  enforce  them  in  this  case.  If  it  denies  such 
liens,  that  is  the  original  reason  why  equity  creates  and  enforces  them." 

Like  many  other  questions  of  law,  this  matter  can  only  be  determined 
by  a  brief  historical  survey  of  the  subject.  One  of  the  most  curious  and 
interesting  chapters  in  legal  history  is  the  frantic  efforts,  made  by  Par- 
liament, at  that  time  composed  for  the  most  part  of  rude  and  unlettered 
warriors,  in  a  series  of  statutes,  to  abolish  the  ecclesiastical  invention 
of  uses.  The  chancellors  were  ecclesiastics,  who  comprised  within 
their  ranks  nearly  all  the  learning  and  scholarship  of  that  age,  and 
they  gravely  examined  the  acts  of  Parliament  to  abolish  uses,  professing 
that  they  were  as  much  bound  by  them  as  the  courts  of  common  law. 
An  examination  of  these  crude  statutes  by  trained  intellects  always 
developed  the  fact  that  only  certain  prohibitions  were  contained  in 
them,  and  that  their  effect  could  easily  be  avoided  by  applying  the 
principle  of  uses  to  contingencies  not  provided  for  by  Parliament,  and, 
hence,  not  forbidden.  The  chancellors  said :  "  Parliament  has  forbidden 
A,  B  and  C,  but  has  not  forbidden  X,  Y  and  Z.  Therefore,  to  the  latter 
we  will  still  continue  to  apply  our  principles."  The  binding  effect  of 
positive  statutes  upon  chancery  courts  was  not  questioned  even  at  that 
early  stage  in  the  development  of  equity  jurisprudence. 

For  a  general  discussion  of  this  subject  see  Minor's  Institutes,  Vol.  U, 
Chap.  X,  and  Spence's  Equitable  Jurisdiction,  Vol,  I,  pp,  4.%  et  seq. 

In  the  nature  of  things  statutes  must  be  obligatory  upon  courts  of 
equity  as  well  as  courts  of  common  law,  because  it  would  be  contrary  to 
the  theory  of  a  government,  composed  of  three  coequal  and  (!0-ordinate 


566  The  Law  of  Pledge. 

departments,  to  hold  that  the  department  vested  with  the  power  to 
enact  laws  can  not  bind  all  the  courts.  No  case  can  be  found  declaring 
that  courts  of  equity  are  not  bound  to  follow  positive  statutory  require- 
ments. If  they  were  not  bound,  they  would  be  vested  with  power 
to  repeal  the  law,  and  thus  constitute  a  power  higher  than  the  legisla- 
tive. It  is  perfectly  true  that  equity  allows  rights  and  enforces 
remedies  outside  of  the  domain  of  the  statutes,  but  has  never  openly 
violated  them.     The  history  of  uses  and  trusts  proves  this  assertion. 

Blackstone.  after  enumerating  a  number  of  instances  of  hardship 
under  positive  laws  which  courts  of  equity  can  not  relieve,  concludes  as 
follows : 

'•  In  all  such  cases  of  positive  law.  the  courts  of  equity,  as  well  as  the 
courts  of  law,  must  say  with  Ulpian,  '  Hoc  quidem  per  quam  durum  est, 
sed  ita  lex  scripta  est.'  " 

Blackstone  then  continues  thus : 

"  It  is  said,  that  a  court  of  equity  determines  according  to  the  spirit 
of  the  rule,  and  not  according  to  the  strictness  of  the  letter.  But  so 
also  does  a  court  of  law.  Both,  for  instance,  are  equally  bound,  and 
equally  jjrofess  to  interpret  statutes  according  to  the  true  intent  of  the 
Legislature.  *  *  *  But  there  is  not  a  single  rule  of  interpreting  laws, 
whether  equitably  or  strictly,  that  is  not  equally  used  by  the  judges  in 
the  courts  both  of  law  and  equity;  the  construction  must  in  both  be  the 
same,  or,  if  they  differ,  it  is  only  as  one  court  of  law  may  also  happen  to 
differ  from  another.  Each  endeavors  to  fix  and  adopt  the  true  sense  of 
the  law  in  question;  neither  can  enlarge,  diminish  or  alter  that  sense  in 
a  single  title."     Vol.  Ill,  marginal  page  431. 

Merwin,  in  his  work  on  Equity  and  Equity  Pleading,  says,  p.  60: 
'■^  All  positive  ntles  of  law.  whether  of  statute  or  of  common  law.  areas 
obligatory  upon  courts  of  equity  as  upon  courts  of  law,  whenever  the 
matters  to  which  those  rules  appl}^  are  in  question."'  See  also  Fon- 
blanque's  Equit3%  Book  I.  Chap.  I,  Sec.  3.  and  Stern  et  al.  vs.  Gardner, 
20  111.  304. 

It  is,  therefore,  clear,  that  courts  of  equity  are  bound  bv  the  positive 
requirements  of  statute  law,  and  we  think  that  we  do  not  misstate  the 
position  of  appellees'  counsel  when  we  say  that  their  contention  is,  that 
a  vmiform  system  of  federal  equity  jurisprudence  was  adopted  by  the 
federal  constitution,  but  that  from  that  system  was  eliminated  oce  of 
its  chief  maxims — equity  follows  the  law. 

This  maxim,  of  course,  assuming  for  the  sake  of  the  argument  that 
there  is  no  other  obligation  resting  upon  federal  courts  of  equity  to 
follow  State  laws,  has  enabled  them  to  conform  to  the  inevitable 
changes  in  the  rules  of  substantive  law  of  the  various  States,  while 
preserving  uniformity  in  the  forms  of  procedure  in  all  the  States. 
Were  it  otherwise,  law  would  be  in  a  state  of  continual  improvement, 
owing  to  the  means  providing  for  its  amelioration,  while  equity  in 
the  federal  courts  would  be  unable  to  modify  any  of  its  rules,  no  matter 


The  Law  op  Pledge.  567 

how  urgently  required  by  the  exigencies  of  changing  conditions.  The 
law  would  improve,  equity  would  stagnate  and  defeat  the  very  purpose 
for  which  it  originally  sprang  into  being.  Let  us  see  how  the  Supreme 
Court  has  construed  this  maxim. 

In  the  case  of  Hedges  vs.  Dixon  County,  150  U.  S.  182,  where  the 
holders  of  municipal  bonds,  issued  by  a  county  in  excess  of  its  author- 
ity, tried  to  invest  a  court  of  equity  with  jurisdiction  by  offering  to 
cancel  so  many  of  the  bonds  as  exceeded  the  prescribed  limit,  and  to 
have  the  residue  thereof  declared  valid  and  enforced,  the  court  said 
through  Mr.  Justice  Jackson,  on  page  192,  in  dismissing  the  bill: 
"'  The  established  rule,  although  not  of  universal  application,  is  that 
equity  follows  the  law,  or,  as  stated  in  Marjniac  vs.  Thompson,  15  How. 
281,  299,'"  that  wherever  the  rights,  or  the  situation  of  parties,  are 
clearly  defined  and  established  by  law,  equity  has  no  power  to  change 
or  unsettle  those  rights,  or  that  situation,  but  in  all  such  instances  the 
maxim,  oequitas  sequitur  legem,  is  strictly  applicable. 

"  Where  a  contract  is  void  at  law  for  want  of  power  to 

3IAKE    it,    a    court    OF  EQUITY   HAS    NO   JURISDICTION   TO   ENFORCE 

SUCH  CONTRACT,  or,  in  the  absence  of  fraud,  accident  or  mistake,  to  so 
modify  it  as  to  make  it  legal  and  then  enforce  it.     Courts  of  equitt 

CAN  NO  MORE  DISREGARD  STATUTORY  AND  CONSTITUTIONAL  REQUIRE- 
MENTS AND  PROVISIONS  THAN  CAN  COURTS  OF  LAW.  Til EY  ARE  BOUND 
BY  POSITIVE  PROVISIONS  OF  A  STATUTE  EQUALLY  WITH  COURTS  OF 
LAW,  AND  M'HERE  THE  TRANSACTION,  OK  THE  CONTRACT,  IS  DECLARED 
VOID  BECAUSE  NOT  IN  COMPLIANCE  WITH  EXPRESS  STATUTORY  OR 
CONSTITUTIONAL  PROVISIONS,  A  COURT  OF  EQUITY  CAN  NOT  INTER- 
POSE TO   GIVE  VALIDITY  TO   SUCH  A  TRANSACTION,  OR  CONTRACT  OR 

ANY  PART  THEREOF.  These  general  propositions  clearly  establish  that 
the  present  bill  can  not  be  sustained,  and  our  conclusion,  therefore,  is 
that  there  was  no  error  in  the  judgment  of  the  court  below  in  dismiss- 
ing the  bill,  and  that  judgment  is  accordingly  affirmed. " 

Here  the  Supreme  Court  declare  in  emphatic  terms  that,  when  a 
contract  is  void  at  law  for  want  of  power  to  make  it,  a  federal  court  of 
equity  has  no  jurisdiction  to  enforce  it.  Such  is  the  exact  case  at  bar, 
where  the  so-called  pledge  of  the  unearned  sugar  bounty  to  an  unas- 
certained amount  to  secure  an  unascertained  indebtedness  is  attempted 
to  be  enforced,  and  the  pledgees,  knowing  that  they  have  and  never 
had  either  a  right  or  a  remedy  in  the  State  courts  of  Louisiana,  are 
seeking  for  an  unconstitutional  perversion  of  federal  power  to  protect 
them. 

In  the  case  of  Ewing  vs.  City  of  St.  Louis,  5  Wall.  419,  the  court 
say: 

"  The  complainant  can  ask  no  greater  relief  in  the  courts  of  the 
United  States  than  he  could  obtain,  were  he  to  resort  to  the  State 
courts.  If  in  the  latter  courts,  equity  loould  afford  no  relief,  neither  will 
it  in  the  former." 


568  The  Law  of  Pledge. 

VI. 

A  doctrine,  like  a  tree,  is  known  by  its  fruits,  and  it  is  indispensable 
in  arriving  at  a  correct  decision  of  any  disputed  proposition  of  law  to 
advert  to  its  necessary  consequences,  and  we  will  now  accept  the  pre- 
mises of  the  learned  Judge  a  quo,  and  follow  them  to  their  logical  con- 
clusion. 

The  equity  jurisdiction  of  the  federal  courts,  meaning  the  rules  of 
substantive  law  administered  by  them,  was  crystallized  by  the  consti- 
tution, in  1789,  and  can  not  be  changed  save  by  an  amendment  of  that 
instrument. 

The  implied  mortgage,  arising  from  the  deposit  of  title  deeds,  was 
at  that  time  an  admitted  branch  of  equity  jurisdiction,  and,  therefore, 
must  now  exist.  Hence,  in  defiance  of  the  Louisiana  Statute  of  Reg- 
istry, a  mortgage,  perfect  as  against  the  world,  can,  to-day,  be  created 
in  Louisiana  by  the  simple  deposit  of  title  deeds,  and  enforced  in  a  fed- 
eral court  of  equity. 

Trusts  were  another  admitted  branch  of  equity  jurisdiction,  at  that 
time,  and,  therefore,  must  still  exist.  Trusts  upon  high  consid- 
erations of  public  policy  are  inhibited  in  Louisiana  by  Art.  1520 
of  the  Revised  Civil  Code.  To-day,  in  Louisiana,  a  man  may,  by 
act  inter  vivos,  or  by  will,  convey  property  to  another  in  trust  for 
a  third  person,  and  the  beneficiary  can  enforce  this  trust  in  a  fede- 
ral court  of  equity  sitting  in  this  State.  A  widow's  right  to  the  assign- 
ment of  dower  was  then  another  acknowledged  subject  of  equitable 
cognizance.  Therefore,  to-day,  in  Louisiana,  a  widow  can  enforce  <her 
right  to  the  assignment  of  dower  in  a  federal  court  of  equity.  Ex- 
amples might  be  multiplied  indefinitely,  but  we  think  that  these  are 
sufficient  (o  demonstrate  that  the  position  is  wholly  untenable.  See 
the  introduction  to  Adams'  Equity,  for  the  grounds  of  equity  jurisdic- 
tion, practically  all  of  which  existed,  in  1789.  Again,  if  a  federal  court 
of  equity  is  not  bound  to  respect  State  laws,  why  can  not  a  chattel 
mortgage,  though  unknown  to  the  law  of  Louisiana,  be  enforced  in 
that  court? 

In  each  State  there  must,  therefore,  be  two  bodies  vested  with  power 
to  declare  the  law  in  matters  of  State  law  and  local  policy,  the  State 
Legislature  and  a  federal  court  of  equity,  which  must  declare  any 
State  law  unconstitutional  and  void,  which  in  any  manner  modifies  the 
subjects  of  equity  jurisprudence,  supposed  to  have  been  adopted  by  the 
federal  constitution. 

It  may  be  added,  that  if  this  doctrine  obtains,  the  Supreme  Court  of 
the  United  States  would  better  at  once  enter  a  decree,  were  such  a  thing 
possible,  to  the  effect  that  every  State  statute  in  conflict  with  any  of 
the  doctrines  of  this  uniform  system  of  federal  equity  jurisprudence  is 
unconstitutional,  null  and  void,  and  leave  the  States  to  begin  the  im- 
,  possible  task  of  conforming  their  laws  to  the  new  order  of  things. 


The  Law  of  Pledge.  569 

The  adoption  of  this  doctrine  would  also  mean  the  vague  and  indefi- 
nite extension  of  federal  power,  and  that  the  fiat  of  the  federal  chan- 
cellor would  change  a  government  with  limited  into  one  of  unlimited 
powers.  This  is  a  far  stronger  objection  to  the  assumption  of  such 
power  than  any  argutnentum  ab  inconvenienti,  for  it  involves  the  de- 
rangement of  our  dual  system  of  government,  and  the  reserved  powers 
of  the  States,  guaranteed  by  the  United  States  Constitution,  would  be 
swallowed  up  in  this  flood-tide  of  usurped  federal  authority.  Finally, 
even  assuming  that  the  position  of  appellees'  counsel  is  correct,  the 
maxim,  equity  follows  the  law,  for  the  first  time  in  the  history  of  the 
equity  system,  would  be  formally  abandoned,  and  a  system  perfected 
through  centuries  of  labor  would  be  remitted  to  that  condition  of  "  un- 
bounded discretion  "  which  marked  its  crude  beginnings. 

The  contract  sought  to  be  set  up  by  the  interveners  in  this  suit  is  a 
nullity  under  the  laws  of  Louisiana,  and,  therefore,  no  contract  rights 
could  ever  have  attached.  It  would  seem  very  anomalous  that  a  con- 
tract, void  under  an  express  State  statute,  and  void  in  the  State  courts, 
could  be  enforced  in  the  federal  courts. 

We  have  been  unable  to  find  a  single  federal  decision,  overturning  a 
CONSTITUTIONAL  STATE  LAW,  establishing  a  rule  of  property,  and  the 
provisions  of  the  Civil  Code,  defining  pledges  and  privileges,  and  regu- 
lating the  preferences  of  creditors,  are  certainly  rules  of  property. 

vn. 

No  one  could  fail  to  be  struck  by  the  utter  inconsistency  of  the  two 
positions  which  the  appellees'  learned  counsel  advocate.  They  first 
claim  for  their  clients  a  lessor's  privilege  of  the  most  extensive  order, 
on  the  ground  that  the  Louisiana  statute  and  decisions,  and  the  sources 
thereof  in  the  Code  Napoleon,  give  it  to  them,  and  that  this  Court  is 
bound  to  follow  the  Louisiana  law,  no  matter  how  different  it  may  be 
from  the  law  of  every  other  State  in  the  Union.  In  the  next  breath 
they  contend  with  equal  vigor  that  their  clients  are  entitled  to  an  equi- 
table lien,  which  is  expressly  forbidden  by  the  Louisiana  statutes  and 
decisions,  and  insist  that  the  Louisiana  authorities  must  be  disre- 
garded, taking  for  granted  that  they  can  not  seriously  argue  for 
the  existence  of  equitable  liens  in  Louisiana.  In  one  case  they  vehe- 
mently call  upon  the  Louisiana  law  to  save  them;  in  the  other  they  call 
with  equal  vehemence  upon  a  federal  court  of  equity  to  save  them 
from  the  Louisiana  law.  There  is  absolutely  no  difference  between  the 
cases,  or  the  etticacy  of  the  two  statutes,  and  both  are  equally  obliga- 
tory upon  a  federal  court  of  equity. 

They  have  addressed  themselves  to  the  engaging  task  of  extending 
the  lessor's  privilege  in  the  teeth  of  the  solemn  injunction  of  the  Code 
that  a  privilege   can  only  be  claimed  for  those  debts  to  which  it 


570  The  Law  of  Pledge. 

is  expressly  granted— to  a  case  never  contemplated  by  the  statute,  and 
to  the  further  task  of  creating  a  privilege,  known  as  an  equitable  lien 
in  the  common  law  States,  in  the  teeth  of  an  equally  solemn  injunction 
of  the  Code  that  lawful  causes  of  preference  are  privileges  and  mort- 
gages. In  one  case  they  want  the  Court  to  extend  a  recognized  privi- 
lege, and  in  the  other  they  want  a  privilege  created,  contrary  to  the 
State  law. 

In  conclusion,  the  value  of  the  federal  system  in  matters  of  concur- 
rent jurisdiction  with  the  State  courts  depends  upon  its  flexibility  and 
its  power  to  adapt  itself  to  the  jurisprudence  of  each  State.  The 
harmonious  administration  of  the  same  laws  in  the  concurrent  juris- 
dictions is  one  of  the  wonders  of  government,  and  a  perpetual  vindi- 
cation of  the  wisdom  of  the  framers  of  the  constitution.  Well  may 
we  exclaim  with  Mr.  Gladstone,  as  we  witness  its  operation,  that  the 
federal  constitution  is  the  most  wonderful  instrument  that  the  brain  of 
man  has  ever  devised  within  a  given  time. 

Walter  H.  Saunders, 

Counsel  for  John  II.  Murphy^  Intervenor  and  Appellant. 


BRIEF  OF  J.  U.  PAYNE  ET  AL.,  APPELLEES. 


in. 

The  third  question  is  as  follows : 

"•  If  the  second  question  be  answered  in  the  affirmative,  can  such 
equitable  lien,  under  the  laws  of  Louisiana,  be  so  enforced  in  the  present 
suit  as  to  appropriate  the  bounty  money  to  the  payment  of  the  claim  of 
the  Paynes,  to  the  exclusion  of  the  general  creditors  of  the  Ferris 
Manufacturing  Company?"' 

Courts  of  equity  have,  from  time  immemorial,  recognized  and 
enforced  such  equitable  liens,  and  courts  of  the  United  States  sitting  in 
equity  in  the  State  of  Louisiana  have  the  unquestionable  right  and  duty 
to  recognize  and  enforce  such  a  lien,  unless  its  power  and  duty  to  do  so 
can  be  and  has  been  taken  away  by  the  statutory  law  of  the  State  of 
Louisiana. 

The  contention  of  the  appellants  rests  upon  two  propositions,  failure 
to  maintain  either  of  which  would  be  fatal  to  the  contention,  and  both 
of  which,  we  maintain,  are  absolutely  unfounded. 

These  propositions  are : 

1st.  That  State  legislation  can  take  away  the  jurisdiction  of  courts  of 
the  United  States  to  recognize  and  enforce  equitable  liens. 

2d.  That  the  statutory  law  of  the  State  does  forbid  the  recognition  and 
enforcement  of  equitable  liens.  ♦ 

We  will  consider  these  propositions  in  order  and  separatelj^ 

Mr.  Pomeroy,  after  defining  the  nature  and  origin  of  equity  jurisdic- 
tion, proceeds  to  classify  the  jurisdiction  as  being  either  exclusive  or 
concurrent. 

The  exclusive  jurisdiction,  he  says,  embraces: 

"  First.  All  civil  cases  in  which  the  primary  right  violated  or  to  be 
declared,  maintained,  or  enforced,  whether  such  right  be  an  estate, 
title,  or  interest  in  property,  or  a  lien  on  property,  or  a  thing  in  action 
arising  out  of  contract,  is  purely  equitable,  and  not  legal,  a  right,  title, 
estate,  or  interest  created  by  equity,  and  not  by  law.       *        *        * 

"Secondly.  All  civil  cases  in  which  the  remedy  to  be  granted,  and 
of  course,  the  remedial  right,  is  jiurely  equitable,  or  one  which  is 
recognized  and  administered  by  courts  of  equity,  and  not  by  courts  of 
law." 

Id.,  Sees.  137-138. 

"The  concurrent  jurisdiction  embraces  all  those  civil  cases  in  which 
the  primary  right,  estate,  or  interest  of  the  complaining  party  sought 

571 


572  The  Law  op  Pledge. 

to  be  maintained,  enforced,  or  redressed,  is  one  which  is  cognizable  by 
the  law,  and  in  which  the  remedy  conferred  is  of  the  same  kind  as  that 
administered,  under  the  like  circumstances,  by  courts  of  law,  being 
ordinarily  a  recovery  of  money  in  some  form.  The  primary  right, 
estate,  title,  or  interest,  which  is  the  foundation  of  the  suit,  must  be  legal, 
or  else  the  case  would  belong  to  the  exclusive  jurisdiction  of  equity; 
and  the  law  miist,  through  its  judicial  procedure,  give  some  remedy  of 
the  same  general  nature  as  that  given  by  equity,  but  this  legal  remedy 
is  not,  under  the  circumstances,  full,  adequate,  and  complete.  The 
fact  that  the  legal  remedy  is  not  full,  adequate,  and  complete  is,  there- 
fore, the  real  foundation  of  this  concurrent  branch  of  the  equity  juris- 
diction." 

Pomeroy  Eq.  Jur..  Sec.  139. 

In  defining  the  subjects  which  are  embraced  in  the  exclusive  equity 
jurisdiction,  Mr.  Pomeroy  expressly  includes  the  recognition  and 
enforcement  of  what  are  called  '•  equitable  liens."    Id..  Sec.  1(J5. 

This  is  done  with  manifest  propriety,  because  the  primary  right  and 
the  remedy  for  its  enforcement  are  both  created  exclusively  by  equity, 
and  are  not  recognized  at  law;  and,  indeed,  as  abundantly  shown  by 
the  authorities  cited  in  our  original  brief,  the  fact  that  the  law  does 
not  recognize  such  liens  is  the  very  reason  why  equity  grants  and 
enforces  them. 

What  then  can  be  the  force  or  bearing  of  arguments  going  to  show 
that  the  statutes  of  Louisiana  do  not  recognize  or  enforce  such  rights, 
even  if  they  were  sound? 

The  enforcement  of  equitable  liens  arising  from  contracts  is  a 
branch  of  the  great  equitable  remedy  of  specific  performance  which  is 
also  assigned  by  Mr.  Pomeroy  to  the  exclusive  jurisdiction.  Id.,  Sec. 
171,  No.  3. 

The  proposition  that  State  legislation  can  limit  or  destroy  the 
exclusive  equity  jurisdiction  of  the  Fedei'al  Courts  is  absolutely 
unsound.  If  such  legislation  can  destroy  their  exclusive  equity  juris- 
diction to  recognize  and  enforce  equitable  liens,  it  can  equally  destroy 
every  other  branch  of  their  equity  jurisdiction. 

The  State  might  pass  statutes  of  the  following  tenor  and  effect: 

1st.  Parties  to  a  contract  shall  not  be  entitled  to  enforce  specific  per- 
formance thereof,  but  the  sole  remedy  for  breach  of  contract  shall  be 
by  an  action  of  damages. 

2d.  Parties  shall  be  bound  irrevocably  by  the  express  terms  of  their 
contracts,  and  shall  be  entitled  to  no  relief  on  the  ground  of  accident, 
mistake,  or  fraud. 

3d.  Nothing  shall  be  considered  as  done  except  that  which  has  been 
actually  done,  and  the  rule  that  that  shall  be  considered  as  done  which 
ought  to  be  done  shall  in  no  case  be  applied. 

4th.  What  are  known  as  equitable  rights  shall  not  be  enforced,  but 
no  rights  shall  be  recognized  except  those  derived  from  the  express 
terms  of  the  statute  of  the  State. 


The  Law  op  Pledge.  573 

If  such  statutes  were  passed  and  were  binding  on  tbe  Federal  Courts 
of  the  United  States  sitting  in  Louisiana,  what  would  remain  of  the 
equity  jurisdiction  of  the  Federal  Courts?  Nothing  except  a  vain  and 
senseless  system  of  judicial  procedure,  having  no  rational  object  or 
purpose,  and  no  application  to  any  substantive  rights  whatever  to  the 
enforcement  of  which  the  system  was  adapted  and  for  the  enforcement 
of  which  it  was  devised. 

The  effect  would  be  to  convert  the  State  of  Louisiana  into  a  little 
island  in  the  midst  of  the  great  sea  of  federal  equity  jurisdiction  which 
embraces  all  the  other  States  of  this  Union;  at  the  shores  of  which  the 
argosies  of  equity  jurisprudence  must  halt  and  turn  away  to  more  con- 
genial climes. 

The  proposition  seems  to  us  utterly  untenable.  It  is  in  irreconcilable 
contradiction  with  the  following  cardinal  principles  which  regulate 
and  define  the  equitable  jurisdiction  of  the  courts  of  the  United  States, 
to-wit : 

1st.  That  the  equity  jurisdiction  of  the  courts  of  the  United  States  is 
derived  exclusively  from  the  constitution  and  laws  of  the  United  States. 

2d.  That  this  jurisdiction,  in  the  language  of  Mr.  Pomeroy,  "  exists 
uniformly  and  to  its  full  extent  throughout  the  entire  Union,  independ- 
ent of  and  unaffected  by  any  State  laws  or  any  particular  system  of 
jurisprudence  and  legislation  adopted  by  individual  States,"  and  "is 
wholly  unmodified  and  unabridged  by  State  legislation  which  deals 
with  subjects  belonging  to  the  general  system  of  equity  jurisprudence. 
State  laws  subtracting  from  or  limiting  the  scope  of  equity  do  not  act 
upon  the  general  powers  and  jurisdiction  held  by  the  national  courts.  ' 

1  Pomeroy,  Sees.  292,  293,  294. 

3d.  That  Sec.  721,  U.  S.  Revised  Statutes,  declaring  "the  laws  of  tbe 
several  States  shall  be  regarded  as  rules  of  decision  in  trials  at  common 
law  in  the  courts  of  the  United  States''  does  not  apply  to  cases  in 
equity,  in  which  cases  the  principles  of  equity  jurisprudence,  and  not 
the  laws  of  the  State,  are  the  rules  of  decision. 

Every  one  of  the  foregoing  cardinal  principles  is  firmly  established  by 
the  consistent  jurisprudence  of  the  federal  courts  from  the  foundation 
of  the  government  until  now,  and  not  one  of  them  was  ever  before,  to 
our  knowledge,  seriously  controverted.  From  the  mass  of  authorities 
on  the  subject  we  select  the  following: 

"  The  courts  of  the  United  States  have  jurisdiction  in  equity  derived 
from  the  Constitution  and  laws  of  the  Union,  which  is  uniform 
throughout  all  the  Slates." 

Robinson  vs.  Campbell,  3  Wheaton,  212. 
Neves  vs.  Scott,  13  Howard,  268, 
Fitch  vs.  Creighton,  24  Howard,  159, 

"  The  equity  jurisdiction  of  the  courts  of  the  United  States  is  derived 
from  the  Constitution  and  laws  of  the  United  States.     Their  powers  and 


574  The  Law  of  Pledge. 

rules  of  decision  are  the  same  in  all  the  States.  Their  practice  is  regu- 
lated by  themselves,  and  by  rules  established  by  the  Supreme  Court. 
In  all  these  respects  they  are  unaffected  by  State  legislation." 

Xoonan  vs.  Lee,  2  Black.  509. 

"  While  the  courts  of  the  Union  are  required  by  the  statutes  creating 
them  to  accept  as  rules  of  decision  in  trial  at  common  law,  the  laws  of 
the  several  States,  their  jurisdiction  in  equity  can  not  be  Impaired  by 
the  local  statutes  of  the  different  States  in  which  they  sit.  *  *  *  'Phe 
equity  jurisdiction  of  the  courts  of  the  United  States  is  the  same  that 
the  high  court  of  chancery  in  England  possesses,  and  is  subject  to 
neither  limitation  or  restraint  by  State  legislation,  and  is  uniform 
throughout  the  different  States  of  the  Union." 

Kirby  vs.  Lake  Shore  K.  K.,  120  U.  S.  130. 

"Chancery  jurisdiction  is  conferred  on  the  courts  of  the  United  States 
by  the  Constitution,  under  certain  limitations;  and,  under  these  limi- 
tations, the  usages  of  the  high  court  of  chancery  in  England,  which 
have  been  adopted  as  rules  by  this  court,  furnish  the  chancery  law 
which  is  exercised  in  all  the  States,  and  even  in  those  where  no  State 
chancery  sj'Stem  exists. 

••  Under  this  system,  where  relief  can  be  given  by  the  English  chan- 
cery, similar  relief  may  be  given  by  the  courts  of  the  Union." 

State  of  Pennsylvania  vs.  The  Wheeling,  etc.,  Bridge  Co.,  13  Howard, 
519.     (Syllabus.) 

'•  It  was  not  the  intention  of  Congress,  by  the  enactments  relating  to 
the  adoption  of  State  laws  in  the  courts  of  the  United  States,  to  confine 
the  Federal  Courts  to  the  same  remedies  which  existed  in  the  courts  of 
the  respective  States.  Such  a  rule  would  forbid  equitable  jurisdiction 
to  the  Federal  Courts  sitting  within  those  States  which  have  no  courts 
exercising  such  jurisdiction.  The  true  rule  is  that  the  remedies  in  the 
courts  of  the  United  States  are  to  be,  at  common  law  or  in  equity,  not 
according  to  the  practice  of  the  particular  State,  but  according  to  the 
principles  of  common  law  and  equity  jurisprudence,  as  those  systems 
are  distinguished  and  defined  in  England." 

Supreme  Court  ISIS,  Robinson  vs.  Campbell. 

3  Wheat.  212,  222,  S.  P.  1S19,  United  States  vs.  Howland,  4  Id.  lOS, 
115. 

''The  Supreme  Court  is  not  bound  by  the  decision  of  a  State  court 
upon  a  question  of  equity  jurisprudence.  The  Constitution  having 
recognized  equity  as  a  branch  of  jurisprudence,  whenever  a  case  in 
equity  arises  under  the  judicial  power  of  the  United  States  it  is  for  the 
courts  of  the  United  States,  and  for  the  Supreme  Court,  in  the  last  resort, 
to  decide  the  principles  applicable  to  it." 

4  Wheat.  115;  3  Id.  222;  6  Pet.  658;  9  Pet.  614;  12  How.  139; 
Supreme  Ct.  1851,  Neves  vs.  Scott,  13  How.  268. 

"  The  jurisdiction  of  the  Federal  Courts  can  not  be  affected  by  State 
legislation,  and  they  will  enforce  equitable  rights  created  by  such 
legislation  if  they  have  jurisdiction  of  the  subject  matter  and  the  par- 
ties." 

Supreme  Ct.  1878,  Smith  vs.  Railroad  Co..  99  U.  S.  398. 


The  Law  of  Pledge.  575 

"  The  State  laws  furnish  the  rule  of  decision  in  the  courts  of  the 
United  States  in  cases  at  common  law,  but  the  equity  jurisdiction  of 
those  courts  is  one  and  the  same  in  every  State,  and  is  in  no  respect 
dependent  upon  local  law.'" 

2d  Cir.  1S37,  Lamson  vs.  Mis,  6  Hunt  Mer.  Mag.  72;  Federal  Cases, 
Vol.  14,  No.  8034;  3d  Circ.  (Pa.)  1826,  McFarlane  vs.  Griffith,  4  Wash. 
C.  C.  585;  Federal  Cases,  Vol.  IG,  No.  8790. 

"  The  rule  that  decisions  of  a  State  govern  Federal  law  Courts  sitting 
in  civil  matters  within  that  State,  does  not  apply  to  the  administration 
of  equity;  which  is,  in  such  case,  governed  entirely  by  the  general 
principles  of  Courts  of  Equity." 

6th  Circ.  (Ohio)  1861,  Burt  vs.  Keyes,  3  West.  L.  Month.  290;  Federal 
Cases,  Vol.  4,  No.  2212. 

"•  The  practice  of  resorting  to  a  Court  of  Chancery  in  order  to  set  up 
an  equitable  against  the  legal  title  can  not  now  be  shaken.  In  all  cases 
in  which  a  Court  of  Equity  takes  jurisdiction,  it  will  exercise  that  juris- 
diction on  its  own  principles." 

Supreme  Court  1809,  Bodley  vs.  Taylor,  5  Cranch,  191. 

"  The  remedies  in  the  courts  of  the  United  States  are  to  be  at  common 
law  or  in  equity,  not  according  to  the  practice  of  the  particular  State, 
but  according  to  the  general  principles  of  common  law  and  equity 
jurisprudence,  as  those  systems  are  distinguished  and  detined  in  Eng- 
land." 

Supreme  Court  1818,  Robinson  vs.  Campbell,  3  Wheat.  212,  S.  P. 
1819,  United  States  vs.  Howland,  4  Wheat.  108. 

"State  laws  can  not  impair  the  equity  jurisdiction  of  the  Federal 
Courts.  If  the  common  law  did  not  afford  a  remedy,  but  resort  to 
equity  was  permitted  on  account  of  the  defect,  parties  whose  citizen- 
ship gives  jurisdiction  may  still  apply  to  the  Circuit  Court  for  equitable 
relief,  notwithstanding  that  as  between  citizens  of  the  S.ate  a  State  law 
has  provided  a  letral  remedy  for  cases  of  like  nature.  Supreme  Court 
1868,  Payne  vs.  Hook,  7  Wall.  425;  1st  Circ.  (Mass.)  1836,  Gordon  vs. 
Hobart,  2  >>^unm.  401;  Federal  Cases,  Vol.  10,  No.  5609;  1855,  Cropper 
vs.  Coburn,  2  Curt.  C.  Ct,  465;  Federal  Cases,  Vol.  6,  No.  3416;  4th 
Circ.  (Va.)  1877,  Breeden  vs.  Lee,  2  Hughes,  484;  Federal  Cases,  Vol. 
4,  No.  1828;  5th  Circ.  (La.)  1871,  Noyes  vs,  Willars,  1  Woods,  187; 
Federal  Cases,  Vol.  18,  No.  10.374;  1884,  Fletcher  vs.  New  Orleans, 
etc.,  R.  R.  Co.,  20  Fed.  Rep.  345;  8th  Circ.  (Col.)  1881,  Strettell  vs. 
Ballou,  9  Fed.  Rep.  256;  3  Mc'Jrary,  46;  and  see  United  States  vs. 
Howland,  4  Wheat.  108. 

•'The  distinction  between  law  and  equity  is  recognized  and  estab- 
lished, for  the  National  Courts,  by  the  Constitution  and  the  acts  of  Con- 
gress regulating  procedure,  and  can  not  be  obliterated,  with  respect  to 
those  courts,  by  any  statutes  of  a  State.  Notwithstanding  a  reformed 
code  of  procedure  of  a  State  declares  that  the  distinction  between  law 
and  equity  is  abolished,  and  that  there  shall  be  but  one  form  of  action — 
a  civil  action — if  a  complainant  resorts  to  a  Federal  Court  he  must 
proceed  at  law  or  in  equity,  according  to  the  nature  of  his  case.  If  he 
files  a  bill  in  equity  when  he  has  an  adequate  remedy  at  law,  his  bill 
may  be  dismissed  even  on  appeal." 


576  The  Law  of  Pledge, 

Supreme  Court  1SG7,  Thompson  vs.  Railroad  Companies,  6  Wall.  134. 
To  nearly  same  effect,  Supreme  Court  1870,  "Walker  vs.  Dreville,  12 
Wall,  440  S.  P.,  7th  Circ.  (Ohio)  1872.  Butler  vs.  Young,  1  Flippin,  276; 
7  West.  Jur,  59;  G  Am,  T.  Rep.  53;  Federal  Cases,  Vol.  4,  No.  2245: 
N.  Dist.  of  Ga.,  Shuford  vs.  Cain,  1  Abb.  U.  S.  302;  Federal  Cases,  Vol. 
22,  No.  12,823, 

"  The  distinction  between  the  enforcement  of  legal  rights  and  the 
pursuit  of  equitable  remedies  in  the  Circuit  Court  is  well  defined  bj 
law,  and  must  be  maintained.-'' 

Circ.  of  Cal.  1S5S.  Loring  vs.  Downer,  McAll.  360;  Federal  Cases, 
Vol,  15,  8513;  Byrd  vs.  Badger,  Id.  443;  Federal  Cases,  Vol.  4,  No.  2266. 

"  In  that  class  of  cases  in  which  courts  of  equity  exercise  their  own 
peculiar  jurisdiction  they  do  not  consider  themselves  bound  by  statutes 
of  limitation  as  obligatory  laws,  but  usually  apply  them  byway  of 
analogy;  unless  injusiice  will  result  from  so  doing.  1st  Circ.  (N.  H.) 
1828.  Sherwood  vs.  Sutton.  5  Mason.  143;  Federal  Cases,  Vol.  21,  No. 
12,781;  (R.  I.)  Pratt  vs.  Northam,  Id.  95;  Federal  Cases,  Vol.  19,  No. 
11.376;  (Mass.)  1862,  Badger  vs.  Badger.  2  Cliff.  137;  Federal  Cases, 
Vol.  2,  No.  718;  (Me.)  1874,  Sullivan  vs.  Portland  &  Kennebec  R.  R. 
Co.,  4  7d.  212;  Federal  Cases,  Vol.  23.  No,  13.596;  3d  Circ,  (Pa.)  1831, 
Baker  vs.  Biddle,  Baldw.  394;  Federal  Cases,  Vol,  2,  No.  764;  4ih  Circ. 
(Va.)  1880,  Etting  vs.  Marx,  4  Fed.  Rep.  673;  4  Hughes.  312;  5ih  Circ. 
(La.)  1880,  Chapman  vs.  Wilson,  4  Woods,  30;  6th  Circ.  (Mich.)  1883. 
Chewett  vs.  Moran,  17  Fed.  Rep.  820;  8th  Circ.  (Me.)  1883,  Foggvs.  St. 
Louis,  H.  &  K.  R.,  etc..  Co.,  Id.  871.  See  also.  Union  Bank  of  Louis- 
iana vs.  Stafford,  12  Ho^v.  327;  Orendorf  vs.  Budlong,  12  Fed.  Rep. 
24." 

"The  fact  that  the  statute  of  limitations  of  the  State  has  barred  the 
claim  in  the  State  couris  will  not  prevent  a  Federal  court  from  enter- 
taining a  suit  brought  by  a  receiver  of  a  national  bank  against  the 
estate  of  a  decedent  for  the  recovery  of  a  debt  alleged  to  have  been 
fraudulently  concealed." 

8th  Circ.  (Mo.),  Johnston  vs.  Roe,  1  Fed.  Rep.  692;  1  McCrary, 
162;  10  Cent.  L.  J.  328;  9  Rep.  672. 

"  The  provision  of  Rev,  Stat.  721, — making  the  limitation  laws  of 
the  States  applicable  to  like  actions  brought  in  the  National  courts — 
does  not  include  special  limitations  upon  suits  in  equity.  Hence 
Section  378  of  the  Oregon  Civil  Code,  prescribing  a  limitation  of  five 
years  as  to  a  suit  in  equity  to  affect  a  patent  to  land,  is  not  binding 
upon  the  Circuit  Court  sitting  in  that  State,  If,  however,  the  cir- 
cumstances of  the  particular  case  render  it  equitable  and  judicious  to 
adopt  the  statute  rule,  the  court,  in  the  exercise  of  its  discretion  as  a 
court  of  equity,  will  do  so.  9th  Circ.  (Or.)  1875,  Hall  vs.  Russell.  3 
Sawyer,  5U6,"'  Federal  Cases,  Vol.  11,  No.  5943. 

"  The  Congress  of  the  United  States,  in  the  act  by  which  the  Fed- 
eral courts  were  organized,  enacted  that  '  the  laws  of  the  several 
States,  except  where  the  Constitution,  treaties  or  statutes  of  the 
United  States  otherwise  require  or  provide,  shall  be  regarded  as  rules 
of  decision  in  trials  at  common  law,  in  the  courts  of  the  United  States, 
in  cases  where  they  apply.'  Rev.  Stat.,  Sec.  721 ;  Judiciary  Act,  24 
September,  1789,  C.  20,  Sec.  34,  1  Stat.  92.    This  statute  has  been  often 


The  Law  of  Pledge.  577 

the  subject  of  construction  in  this  court,  and  its  opinions  have  not 
always  been  expressed  in  language  that  is  entirelj'^  harmonious.  What 
ai'e  the  laws  of  Ihe  several  States  which  are  to  be  regarded  '  as  rules  of 
decision  in  trials  at  common  law  '  is  a  subject  which  has  not  been 
ascertained  and  defined  with  that  uniformity  and  precision  desirable  in 
a  matter  of  such  great  importance. 

"  The  language  of  the  statute  limits  its  application  to  cases  of  trials 
at  common  law.  There  is,  therefore,  nothing  in  the  section  which 
requires  it  to  be  applied  to  proceedings  in  equity,  or  in  admiralty ; 
nor  is  it  applicable  to  criminal  offences  against  the  United  States 
(see  United  States  vs.  Reid,  12  How'.  361),  or  where  the  Constitution, 
treaties  or  statutes  of  the  United  States  require  other  rules  of  deci- 
sion." 

Bucher  vs.  Cheshire  R.  R.  Co.,  125  U.  S.  582. 

It  has  been  further  held  that  Section  721,  Revised  Statutes,  does  not 
apply  even  in  law  cases  to  questions  of  a  general  nature,  such  as  Com- 
mercial Law,  Law  of  Public  Carriers.  Law  of  Negligence,  of  Master 
and  Servant,  etc. 

See  IS  Wallace,  546,  16  Peters,  1,  102  U.  S.  U;  100  U.  S.  239;  138  U. 
S.  67;  147  U.  S.  106;  145  U.  S.  605;  152  U.  S.  282;  70  F.  R.  679;  Idem., 
468;  45  F.  R.  749. 

See  also  Judge  B.  R.  Curtis'  Lectures  on  Jurisdiction  and  Jurispru- 
dence of  Courts  of  the  United  States,  pp.  13  and  213. 

These  cases  illustrate  how  strongly  the  Federal  Courts  resist  the 
invasion  of  their  powers  and  prerogatives  by  State  statutes. 

The  suggestion  that  all  these  decisions  only  apply  to  rules  and 
forms  of  equity  practice  and  procedure,  and  not  to  the  substantive 
equitable  rights  of  the  parties,  is  contradicted  by  the  very  terms  of 
the  authorities  themselves,  which  make  it  clear  that  the  rules  of  deci- 
sion adopted  by  the  National  courts  in  equity  cases  in  determining 
equitable  rights  and  principles,  are  not  the  laws  of  the  States,  but  are 
the  rules  and  principles  of  equity  jurisprudence. 

The  doctrine  of  equitable  liens  is  derived  from  and  founded  exclu- 
sively upon  the  principles  of  equity,  as  established  by  equity  jurispru- 
dence. The  power  to  recognize  and  enforce  such  liens  is  an  element 
of  equity  jurisdiction  conferred  by  the  Constitution  and  laws  of  the 
United  States.  State  laws  did  not  confer  this  power  and  can  not  take  it 
away.  It  exists  in  all  the  other  States  of  this  Union,  and  the  principle 
of  uniformity  requires  that  it  should  exist  equally  in  the  State  of 
Louisiana. 

May  it  please  the  Court : 

It  is  in  the  nature  of  things  that  these  repeated  and  emphatic 
decisions  can  not  be  ignored,  or  robbed  of  meaning,  or  held  to 
be  overruled  by  other  decisions  which  do  not,  in  terms,  over- 
rule. When  cases  are  quoted  which  contain  apparently  contradictory 
doctrines,  the   court  will   look  at  all   the   decisions   together,  and  find 


578  The  Law  of  Pledge. 

some  principle  on  which  they  may  be  reconciled.  We  believe  that 
principle  is  easily  found  and  clearly  apparent.  It  is  this,  that  as  to 
matter  falling  within  the  concurrent  jurisdiction  of  equity,  legislation 
of  the  States  will  receive  consideration  and  effect,  but  that  with  regard 
to  purely  equitable  rights,  arising  under  the  exclusive  equity  jurisdic- 
tion, rights  created  by  equity,  solely  and  exclusively  because  they  are 
not  recognized  by  law,  the  decisions  quoted  and  relied  upon  by  us  will 
apply  and  govern. 

We  have  examined  with  great  care  the  authorities  referred  to  by  our 
learned  adversaries,  and  we  lind  not  one  which  derogates  from  the 
principles  sustained  by  this  jurisprudence  as  applicable  to  cases  arising 
under  the  exclusive  equity  jurisdiction. 

Of  these  authorities  the  following  will  be  found  to  be  cases  at  com- 
mon law : 

Burgess  vs.  Seligman,  107  U.  S.  20. 
Pana  vs.  Bowles,  107  U.  S.  541. 
Carroll  vs.  Smith,  111  U.  S.  563. 
Andreson  vs.  Santa  Anna,  116  U.  S.  362. 
Bowles  vs.  Brimfield,  120  U.  S.  764. 
Folsom  vs.  Township,  1.59  TJ.  S.  625. 
Bank  vs.  Earl,  13  Peters,  519. 
Greene  vs.  Neal's  Lessee,  6  Peters,  291. 
Suydam  vs.  Williamson,  24  Howard,  427. 
Leffingwell  vs.  Warren,  2  Black,  600. 
Telle  vs.  Walker,  11  U.  S.  242. 

Of  course  the  dicta  in  such  cases  have  no  application  to  equit3'  juris- 
diction.    The  equity  cases  referred  to  are: 

Hedges  vs.  Dickson,  150  U.  S.  182. 

Lumber  Company  vs.  Ott,  142  U.  S.  628. 

Bank  vs.  Bank  of  Kansas  City,  136  U.  S.  235. 

Ewing  vs.  St.  Louis,  5  Wallace,  413. 

May  vs.  Tenny,  148  U.  S.  64. 

Casey  vs.  Cavaroc,  96  U.  S.  497. 

Brine  vs.  Insurance  Company,  96  U.  S.  627,  and  others. 

An  examination  of  these  cases  will  show  that  all  of  them  were  cases 
which  fell  within  the  concurrent,  and  not  within  the  exclusive  equity 
jurisdiction,  and  that  the  rights  involved  therein  were  not  equitable 
rights  created  by  equity,  but  rights  based  upon  and  derived  from  the 
law  of  the  State. 

In  Hedges  vs.  Dickson  the  court  simply  held  that  a  contract  abso- 
lutely void  under  the  Constitution  and  laws  of  the  State  by  reason  of 
the  absolute  incapacity  of  the  party,  a  municipal  corporation,  to  make 
it,  could  give  rise  to  no  rights,  either  equitable  or  legal,  a  familiar 
principal  of  equity.     Ex  nihilo  nihil  fit. 


The  Law  of  Pledge.  579 

Lumber  Company  vs.  Ott  involved  nothing  but  rights  claimed  under 
an  assignment  for  the  benefit  of  creditors  made  in  pursuance  to  a  .State 
statute,  and  the  validity  of  which  depended  upon  compliance  with  the 
statute. 

Union  Bank  vs.  Kansas  City  Bank  and  Mav  vs.  Tenney  involved  pre- 
cisely the  same  question. 

A  careful  examination  of  the  case  of  Casey  vs.  Cavaroc  will  show 
conclusively  that  no  equitable  lien  was  claimed  or  involved,  but  that 
the  right  asserted  was  based  upon  a  statutory  pledge,  the  validity  of 
which  depended  upon  compliance  with  the  statute.  In  the  statement 
of  the  case,  at  page  4G8,  we  find  that  the  parties  based  their  right  to 
the  securities  upon  the  claim  that  they  were  '•  actually  pledged  ""  to 
them.  In  the  argument  of  their  counsel,  as  set  forth  at  page  473,  it 
will  be  found  that  the  contention  was  solely  that  the  pledge  was  valid. 
In  the  opinion  of  the  court,  at  page  486,  it  is  stated : 

"It  must  not  be  overlooked  that  the  Credit  Mobilier  has  no  other 
claim  to  the  securities  in  question  but  that  of  pledge.  A  pledge  and 
possession,  which  is  its  essential  ingredient,  must  be  made  out,  or  their 
privilege  fails." 

It  is  clear  that  the  case  involved  nothing  but  a  claim  of  statutory 
right,  which  was,  of  course,  to  be  determined  according  to  the  statute 
in  equity,  as  well  as  at  law. 

The  case  of  Ewing  vs.  St.  Louis,  5  Wallace,  417,  was  a  case  involving 
simply  the  validity  of  proceedings  taken  in  pursuance  of  a  State 
statute,  on  the  ground  that  the  i^roceedings  did  not  comply  with  the 
statute. 

Brine  vs.  Insurance  Co.,  96  U.  S.  627,  only  held  that  a  State  statute 
which  allows  the  mortgagor  twelve  months  to  redeem  after  a  sale 
under  a  decree  of  foreclosure,  and  to  his  judgment  creditor  three 
months  after  that,  governs  to  that  extent  the  mode  of  transferring  the 
title,  and  that  a  Federal  Court  in  Equitj'  would  no  more  deny  that 
right  than  would  a  State  Court. 

We  have  no  knowledge  of  any  principle  within  the  exclusive  equity 
jurisdiction  that  denies  such  a  right. 

We  have  not  time  to  analyze  or  to  refer  to  the  other  equity  cases 
quoted  by  counsel,  but  we  hazard  nothing  in  saying  that  of  them  were 
cases  in  which  the  rights  involved  were  rights  arising  under  the  con- 
current jurisdiction.  We  believe  no  case  can  be  found  in  which  a 
Federal  Court  of  Equity  has  refused  to  enforce  a  purely  equitable  right 
created  by  equity  for  the  very  reason  that  it  was  not  allowed  by  law, 
on  the  ground  that  the  State  statutes  did  not  recognize  it. 

None  of  these  cases  has  the  slighest  application  to  the  question  in  the 
case  at  bar,  which  involves  a  purely  equitable  right,  created  by  equity, 
and  existing  independently  of  any  State  statute. 

The  quotation  from  Sec.  297  of  1  Pomeroy  nuist  be  read  in  connec- 


580  The  Ijaw  of  Pledge. 

tion  with  Sees.  291.  292.  293,  294,  295  aud  296;  and  also  with  Sees.  137, 
138  and  139,  which  define  the  distinctions  between  the  exchisive  and  the 
concurrent  equity  jurisdiction,  and  especially  with  See.  427,  which 
confines  the  maxim  equitas  sequitur  legem  to  cases  within  the  concur- 
rent jurisdiction  and  excludes  it  from  all  application  to  cases  within  the 
exclusive  equity  jurisdiction,  in  which — 

"The  primary  right  violated  or  to  be  declared,  maintained  or 
enforced,  whether  such  right  be  an  estate,  title  or  interest  in  property,, 
or  a  lien  on  property,  or  a  thing  in  action  arising  out  of  contracts, 
is  purely  equitable  and  not  legal;  a  right,  title,  estate  or  interest 
created  by  equity  and  not  by  law." 

1  Pomeroy,  Sec.  137. 

In  the  latter  cases,  it  is  clear  that  the  statutes  of  the  State  can  not 
abridge  or  impair  equitable  rights  or  remedies  created  by  equity,  inde- 
pendentlj'  of  law. 

The  suggestion  that  the  doctrine  of  equitable  liens  does  not  apply  to 
the  case  of  an  insolvent  debtor  would  rob  the  doctrine  of  application  to^ 
the  only  case  in  which  it  would  serve  any  useful  purpose.  If  the 
debtor  was  solvent  and  had  means  sufficient  for  the  satisfaction  of  alL 
his  debts,  there  would  not  be  the  slightest  reason  for  subjecting  partic- 
ular property  to  a  special  lien. 

If  the  Ferris  Company  were  solvent,  and  if  the  funds  in  the  hands  of 
the  receiver  were  sufficient  to  satisfy  all  of  its  debts,  we  would  not  be 
here,  pressing  our  claim  for  a  lien  on  this  particular  fund.  It  is  because 
the  Ferris  Company  is  insolvent,  and  the  funds  in  the  hands  of  its 
receiver  are  insufEcient  to  satisfy  all  its  debts,  that  we  assert  our  lien 
upon  this  particular  fund. 

Equity  recognizes  this  lien,  and  this  Court,  sitting  as  a  Court  of  equity,, 
will  enforce  it. 

This  case  does  not  arise  under  the  insolvent  laws  of  the  State  of 
Louisiana.  It  is  a  case  arising  under  the  purelj'  equitable  jurisdiction 
of  this  Court,  in  the  exercise  of  which  this  fund  has  been  brought 
within  the  custody  of  the  Court,  to  be  marshaled  and  distributed  by 
the  Court  to  those  who  are  entitled  to  it,  and  in  distributing  it,  it  is 
sitting  as  a  Court  of  equity,  and  will  reeogni/e  and  enforce  the  equi- 
table rights  of  parties  as  well  as  their  legal  rights. 

There  are  no  conflicting  liens  on  this  bounty.  Our  lien  is  confined 
by  the  decree  to  the  bounty  on  the  cane  produced  by  ourselves,  and  no- 
other  creditor  pretends  to  have  any  special  lien  upon  it.  It  is  a  conflict 
solely  between  our  equitable  lien  and  the  claims  of  the  general  creditors. 
To  deny  the  lien  in  such  a  case  would  be  an  effectual  obliteration  of 
the  equitable  power  of  this  Court  to  recognize  an  equitable  lien  in  any 
case. 

We  claim  this  lien  is  a  right  o-eofed  by  equity,  founded  on  the  eternal 
principles  of  justice,  enforced  by  equity  in  the  exercise  of  its  exclusive 


The  Law  of  Pledge.  581 

jurisdiction  under  power  derived  from  the  Constitution  and  laws  of 
the  United  States,  which  State  statutes  did  not  confer,  and  can  not  take 
away. 

This  involves  no  infringement  of  State  rights.  The  States  themselves 
consented  to  the  delegation  of  this  power  and  jurisdiction.  The  Con- 
stitution of  the  United  States  and  laws  passed  in  pursuance  thereof,  are 
as  much  laws  of  every  State  as  any  statute  of  the  State  itself. 

We  claim,  therefore,  that  the  legislation  of  the  State  of  Louisiana 
can  not  abridge  the  right  of  a  Court  of  the  United  States,  sitting  in 
equity,  to  recognize  and  enforce  equitable  liens. 

(2.) 

The  other  proposition,  that  the  Civil  Code  of  Louisiana  prohibits  the 
■enforcement  of  equitable  liens,  is  equally  untenable. 

State  laws  and  State  decisions  upon  the  subject  of  "privileges" 
have  not  the  remotest  application  to  the  subject  of  equitable  liens. 
The  Louisiana  "privilege"'  and  the  eciuitable  lien  are  not  merely 
different,  but  are  radically  contradictory  and  antithetical  concepts. 

The  Louisiana  "privilege"''  is  derived  exclusively  from  ihelaio;  the 
equitable  lien  is  derived  from  the  contract  of  the  parties.  To  say  that 
there  can  be  no  equitable  lien  in  any  case  in  which  the  law  does  not 
^rant  a  privilege,  is  to  destroy  the  very  reason  for  which  the  equitable 
lien  is  granted.  If  the  law  granted  a  privilege  there  would  be  no  need 
to  claim  an  equitable  lien.  Many  rights  may  be  created  by  the  express 
terms  of  a  contract,  which  would  not  be  implied  by  law  in  the  absence 
of  express  agreement.  There  is,  therefore,  not  the  slightest  inconsist- 
ency in  sa}ing  that  although  the  law  does  not  grant  a  j:irivilege,  the 
contract  of  the  parties  may  establish  an  equitable  lien,  which  is  not  a 
privilege.  We  say,  therefore,  that  the  laws  of  the  State  prescribing 
the  cases  in  which  the  law  grants  a  iwivilege  independent  of  any  con- 
tract between  the  parties,  and  decisions  of  the  State  Court  interpreting 
those  laws,  have  no  application  to  the  subject  of  equitable  liens.  No 
law  of  the  State  of  Louisiana  and  no  decision  of  her  Supreme  Court  can 
be  found  which  declares  that  the  doctrine  of  equitable  liens  arising 
from  contract  is  forbidden  by  the  law  of  Louisiana.  Our  researches 
have  failed  to  discover  but  three  cases  which  ever  dealt  with  the  sub- 
ject of  equitable  liens  under  the  law  of  Louisiana.  One  is  the  case  of 
Wheeler  vs.  Insurance  Company,  101  U.  S.  439.  It  was  a  case  arising 
in  Louisiana,  and  under  Louisiana  law,  in  which  a  purely  equitable 
lien  was  claimed  and  enforced,  and  in  which  there  was  no  pretence 
that  the  party  had  any  statutory  privilege,  and  there  the  Supreme 
<)ourt  of  the  United  States  said  : 

"  The  equitable  doctrine  upon  which  appellant's  claim  is  founded 
undoubtedly  obtains  in  Louisiana.  It  is  derived  from  the  civil  law, 
which  is  the  basis  of  the  Civil  Code  of  that  State." 


582  The  Law  of  Pledge. 

The  other  cases  are  the  cases  of  Succession  of  Walsh.  9  An.  543,  and 
Webre  vs.  Beltran,  47  An.  195,  which  will  be  referred  to  hereafter. 

We  deny  that  any  decision  to  the  contrary  can  be  found  or  has  been 
made  by  the  Supreme  Court  of  Louisiana,  and  we  believe  that  the 
decision  of  the  Supreme  Court  of  the  United  States  on  this  point  is 
correct. 

The  Civil  Code  of  Louisiana  establishes  as  broad  a  system  of  equity 
as  it  is  possible  to  conceive  of.  We  call  attention  to  the  following- 
articles  of  that  Code : 

Art.  21.  "  In  all  civil  matters,  where  there  is  no  express  law,  the 
judge  is  bound  to  proceed  and  decide  according  to  equitj'.  To  decide 
equitably,  an  appeal  is  to  be  made  to  natural  law  and  reason,  or  re- 
ceived usages  where  positive  law  is  silent." 

Art.  1903.  •'  The  obligation  of  contracts  extends  not  only  to  what  is 
expressly  stipulated,  but  also  to  everything  that,  by  law,  equity  or 
custom,  is  considered  as  incidental  to  the  particular  contract,  or  neces- 
sary to  cai'ry  it  into  effect.'" 

Art.  1964  ''  Equity,  usage  and  law  supply  such  incidents  only  as  the 
parties  may  reasonably  be  supposed  to  have  been  silent  upon  from  a 
knowledge  that  they  would  be  supplied  from  one  of  these  sources." 

Art.  1965.  •'  The  equity  intended  by  this  rule  is  founded  on  the  Chris- 
tian principle  not  to  do  unto  others  that  which  we  would  not  wish  oth- 
ers should  do  unto  us;  and  on  the  moral  maxim  of  the  law  that  no  one 
ought  to  enrich  himself  at  the  expense  o*  another.  When  the  law  of 
the  land,  and  that  which  the  parties  have  made  for  themselves  by  their 
contract,  are  silent.  Courts  must  apply  these  principles  to  determine 
what  ought  to  be  incidents  to  a  contract,  which  are  required  by  equit}^" 

The  Rubric  of  the  Code  under  which  the  two  last  articles  are  found 
is  headed:  •' Of  the  obligations  to  perform,  as  incidents  to  a  contract, 
all  that  is  required  by  equity,  usage  or  law.' 

The  remedy  for  the  enforcement  of  equitable  liens  is  a  branch  of  the 
great  equitable  remedy  of  Speciflc  Performance,  which  is  a  simple 
exertion  of  the  power  of  the  court  to  enforce  specifically  the  obliga- 
tions of  the  contract.  Differently  from  the  Common  Law  and  from  the 
Code  Napoleon,  the  Civil  Code  of  Louisiana  expressly  recognizes  the 
remedy  of  specific  performance  of  contracts : 

Art.  1926.  •'  On  the  breach  of  any  obligation  to  do  or  not  to  do  the 
obligee  is  entitled  to  damages,  or,  in  cases  which  permit  it,  to  a  specific 
performance  of  the  contract  at  his  option,  etc." 

Art.  1927.  "  In  ordinary  cases  the  breach  of  such  a  contract  entitles 
the  party  aggrieved  only  to  damages,  but  w'here  this  would  be  an  inad- 
equate compensation,  and  the  party  has  the  power  of  performing  the 
contract,  he  may  be  constrained  to  a  specific  performance  by  means 
prescribed  in  the  laws  which  regulate  the  practice  of  the  courts," 

These  articles  were  fully  discussed  by  our  Supreme  Court  in  ihe  case 
of  Levine  vs.  Michel,  35  An.  1126. 

There  is,  and  can  be,  no  rational  denial  that  the  obligations  assumed 
by  the  Ferris  Company  in  its  contract  with   intervenors   were  perfectly 


The  Law  of  Pledge.  583 

lawful  and  binding  on  the  company,  and  there  can  be  no  reason  why 
specitic  performance  thereof  should  not  be  enforced.  The  fact  that 
the  contract  was  not  effectual  to  create  a  legal  privilege  under  the 
statutes  of  Louisiana,  presents  no  obstacle  whatever  to  compulsion  of 
its  specitic  performance. 

The  Supreme  Court  of  Louisiana  has  expressly  recognized  the  doc- 
trine that  an  equitable  right  to  be  paid  out  of  a  fund  by  preference 
over  the  general  creditors  may  result  from  the  contract  between  the 
parties,  although  that  contract  did  not  create  a  legal  privilege.  Such 
an  equitable  right  was  enforced  in  the  case  of  the  Succession  of  Walshe 
9  An.  543,  where  the  court  began  its  decision  by  saying: 

"  It  may  be  conceded  that  the  company  is  not  entitled  to  a  privilege 
upon  the  fund  in  dispute,  using  that  term  in  its  technical  sense.  But 
we  think  the  equity  of  the  company  to  receive  this  fund  by  reason  of 
the  peculiar  terms  of  their  contract  with  Walshe,  and  the  circumstances 
of  the  case,  is  clear.*' 

The  court  further  says . 

"  It  seems  to  us  it  would  be  a  clear  violation  of  the  terms  and  spirit 
of  the  contract,  and  of  the  reservation  made  in  the  judge's  order,  to 
take  the  fund  from  the  company,  and  distribute  it  pro  rata  among  all 
the  creditors.  This  case  is  the  first  of  the  kind  presented  for  the  con- 
sideration of  this  court,  and  our  attention  has  not  been  directed  ta 
decisions  of  other  tribunals  upon  the  precise  subject.  But  we  fiod  a 
very  satisfactory  analogy  in  the  rule  of  the  Supreme  Court  of  Pennsyl- 
vania, in  Morgan  vs.  Bank  of  America,  8  Serg.  and  R.  73." 

This  was  a  plain  case  of  equitable  lien  upon  a  fund,  arising  from  con- 
tract, and  not  accompanied  by  any  technical  privilege,  which  was 
enforced  by  the  Supreme  Court  of  Louisiana. 

The  case  of  Webre  vs.  Beltran,  47  An.  195,  is  a  very  parallel  case  to 
the  one  at  bar.  It  was  a  case  of  insolvency,  and  involved  the  dis- 
tribution of  bounty  collected,  precisely  as  in  this  case.  Beltran  did  not 
claim  to  be  the  owner  of  the  bounty,  and  he  did  not  claim  any  technical 
pledge  or  privilege  on  the  bounty,  but  he  claimed  that  under  his  con- 
tract v/ith  the  insolvent  he  was  entitled  to  have  his  debt  paid  out  of  the 
Dounty  by  preference  over  other  creditors. 

The  case  is  very  instructive,  but  we  will  content  ourselves  with 
quoting  only  one  paragraph,  to  show  how  plainly  the  Court  enforced  an 
equitable  hen  arising  from  contract  solely,  in  opposition  to  the  claims 
of  the  syndic  of  the  insolvent  and  the  general  creditors  under  the 
articles  of  the  code  relied  on  in  this  case : 

"  In  reference  to  the  bounty  collected  by  Beltran  &  Co.,  it  is  claimed 
that  the  law  gave  no  privilege  or  pledge  to  the  defendant  upon  that 
fund,  and  that  not  having  been  collected  from  the  government  at  the 
time  of  tiie  surrender  it  should  be  turned  over  to  the  syndic  to  be  dis- 
posed of  as  the  common  pledge  of  all  the  creditors.  It  may  be  true  that 
neither  a  iirivilege  nor  a  i)ledge  resulted  by  law  in  favor  of  Beltran  & 
Co.,  by  reason  of  their  being  furnishers  of  supplies,  and  that  it  would  be 


5j84  The  Law  of  Pledge. 

necessary  for  them  to  base  their  right  on  contract,  but  this  is  precisely 
what  they  do.  They  rest  upon  the  verbal  contract  between  the  parties 
made  in  the  beginning  of  the  year  1892,  and  the  stipulations  of  tlie  par- 
ties in  regard  to  it."     Page  202. 

The  Court  maintained  the  contract  right  of  Beltran  to  be  paid  out  of 
the  bounty  by  preference  over  all  other  creditors.  We  consider  these 
two  cases  decisive  of  the  question  that  the  courts  of  Louisiana  will  and 
do  recognize  and  enforce  equitable  liens  arising  from  contracts  by  pref- 
erence, in  proper  cases,  over  technical  privileges. 

It  is,  moreover,  a  familiar  principle  of  the  law  of  Louisiana  that 
privileges  and  mortgages  only  take  effect  upon  the  property  of  a  person 
in  the  condition  in  which  that  property  was  at  the  time  when  the  party 
acquired  it,  and  that  such  privileges  and  mortgages  are  subordinate  to 
legal  rights  created  and  existing  at  the  time  of  his  acquisition  of  the 
property. 

In  this  case,  the  cane  of  these  intervenors  passed  into  the  ownership 
and  possession  of  the  Ferris  Company,  subject  to  the  express  agreement 
and  obligation  that  the  bounty  which  might  be  collected  on  sugar 
produced  from  this  particular  cane  should  be  devoted  to  the  pay- 
ment of  intervenor's  claims,  and  should  be  subject  to  an  equitable  lien 
for  the  satisfaction  thereof.  The  property  passed  into  their  possession 
and  ownership  subject  to  these  rights  and  obligations,  and  they  can  not 
be  displaced  or  impaired  by  any  liens  or  privileges  which  the  law  might 
create  upon  the  property  after  its  acquisition  by  the  Ferris  Company. 

There  can  not  be  the  slightest  doubt  that  if  this  case  was  before  the 
Supreme  Court  of  Louisiana,  that  tribunal  would  recognize  and  enforce 
the  right  of  these  intervenors  to  have  their  contract  executed,  and  to  be 
paid  out  of  this  fund  in  preference  to  any  other  creditors  of  the  Ferris 
Company,  and  that  any  privilege  that  such  creditors  might  have  would 
be  subordinated  to  the  clear  equitable  right  of  intervenors,  subject  to 
which  only,  the  Ferris  Company  acquired  the  property. 

We  therefore  maintain  that  the  second  proposition  on  which  the 
contention  of  appellant  is  founded  is  equally  as  fallacious  as  the  first. 

On  the  whole  we  submit  that  all  the  questions  certified  to  this  Court 
should  be  solved  in  favor  of  appellees,  and  that  this  Honorable  the 
Oircuit  Court  of  Appeals  should  be  advised  to  affirm  the  decree  appealed 
from. 

Respectfully  submitted. 

CHAS.  E.  FENNER, 

Solicitor  f 07'  Payne  et  al.,  Appellees. 


FORMS  OF  PLEDGES. 


No.  1. 


Know  all  Men  by  these  Presents,  That  the  undersigned,  in  considera- 
tion of  financial  accommodations  given,  or  to  be  given,  or  continued  to 

the  undersigned  by bank of  the  city  of  New  York,  hereby 

agree  with  the  said  bank  that  whenever  the  undersigned  shall  become 
or  remain,  directly  or  contingently,  indebted  to  the  said  bank  for 
money  lent,  or  for  money  paid  for  the  use  or  account  of  the  undersigned, 
or  for  any  overdraft  or  upon  any  endorsement,  draft,  guarantee  or  in 
any  other  manner  whatsoever,  or  upon  any  other  claim,  the  said  bank 
shall  then  and  thereafter  have  the  following  rights,  in  addition  to  those 
created  by  the  circumstances  from  which  such  indebtedness  may  arise 
against  the  undersigned,  or  his,  or  their  executors,  administrators  or 
assigns,  namely : 

1.  All  securities  deposited  by  the  undersigned  with  said  bank,  as  col- 
lateral to  any  such  loan  or  indebtedness  of  the  undersigned  to  said  bank, 
shall  also  be  held  by  said  bank  as  security  for  any  other  liability  of  the 
undersigned  to  said  bank,  whether  then  existing  or  thereafter  con- 
tracted; and  said  bank  shall  also  have  a  lien  upon  any  balance  of  the 
deposit  account  of  the  undersigned  with  said  bank  existing  from  time 
to  time,  and  upon  all  property  of  the  undersigned  of  every  description 
left  with  said  bank  for  safe  keeping  or  otherwise,  or  coming  to  the 
hands  of  said  bank  in  any  way,  as  security  for  any  liability  of  the 
undersigned  to  said  bank  now  existing  or  hereafter  contracted, 

2.  Said  bank  shall  at  all  times  have  the  right  to  require  from  the 
undersigned  that  there  shall  be  lodged  with  said  bank  as  security  for 
all  existing  liabilities  of  the  undersigned  to  said  bank,  approved  col- 
lateral securities  to  an  amount  satisfactory  to  said  bank;  and  upon  the 
failure  of  the  undersigned  at  all  times  to  keep  a  margin  of  securities 
with  said  bank  for  such  liabilities  of  the  undersigned,  satisfactory  to 
said  bank,  or  upon  any  failure  in  biisiness  or  making  of  an  insolvent 
assignment  by  the  undersigned,  then  and  in  either  event  all  liabilities 
of  the  undersigned  to  said  bank  shall  at  the  option  of  said  bank  become 
immediately  due  and  payable,  notwithstanding  any  credit  or  time 
allowed  to  the  undersigned  by  any  instrument  evidencing  any  of  the 
said  liabilities. 

3.  Upon  failure  of  the  undersigned  either  to  pay  any  indebtedness  to 
said  bank  when  becoming  or  made  due,  or  to  keep  up  the  margin  of 
collateral  securities  above  provided  for,  then  and  in  either  event  said 

5S5 


586  The  Law  of  Pledge. 

bank  may  immediately  without  advertisement,  and  without  notice  to> 
the  undersigned,  sell  any  of  the  securities  held  by  it  as  against  any  or 
all  of  the  liabilities  of  the  undersigned,  at  private  sale  or  Brokers' 
Board  or  otherwise,  and  apply  the  proceeds  of  such  sale  as  far  as  needed 
toward  the  payment  of  any  or  all  of  such  liabilities  together  with 
interest  and  expenses  of  sale,  holding  the  undersigned  responsible  for 
any  deficiency  remaining  unpaid  after  sucli  application.  If  any  such 
sale  be  at  Broker's  Board  or  at  public  auction,  said  bank  may  itself  be  a 
purchaser  at  such  sale  free  from  any  right  or  equity  of  redemption  of 
the  undersigned,  such  right  and  equity  being  hereby  expressly  waived 
and  released.  Upon  default  as  aforesaid,  said  bank  may  also  apply 
toward  the  payment  of  the  said  liabilities  all  balances  of  any  deposit 
account  of  the  undersigned  with  said  bank  then  existing. 

It  is  further  agreed  that  these  presents  constitute  a  continuing  agree- 
ment, applying  to  any  and  all  future  as  well  as  to  existing  transactions 
between  the  undersisrned  and  said  bank. 


Dated  New  York,  the day  of  ,  189 


No.  2. 

$  GOLD.  Xew  York. 189  .. 

without  grace promise  to  pay  to or  order,  at  their 

office,  in   the  city  of  New  York,   the  sum  of dollars,  gold 

coin  of  the  United  States,  present  standard  of  weight  and  fineness,  for 

value  received,   with  interest  at  the  rate  of per  cent,   per 

annum,  payable  having  deposited  herewith,  and  pledged  as 

collateral  security  to  the  holder  hereof,  the  following  property,  viz. ; 

with  authority  to   the  holder  hereof  to  sell  the  whole  of  said 

property,  or  any  part  thereof,  or  any  substitutes  therefor,  or  any  addi- 
tions thereto,  at  any  Brokers'  Board,  in  the  city  of  New  York,  or  at 
public  or  private  sale  in  said  cilj'  or  elsewhere,  at  the  option  of  such 
holder,  on  the  non-performance  of  any  of  the  promises  or  agreements 
herein  contained,  without  notice  of  amount  claimed  to  be  due,  without 
demand  of  payment,  without  advertisement  and  without  notice  of  the 
time  and  place  of  sale,  each  and  every  of  which  is  hereby  expressly 
waived. 

It  is   agreed   that  in  case  of  depreciation  in  the  market  value  of  the 

property   hereby   pledged  which  market  value  is  now  (S ),  or 

which  may  hereafter  be  pledged  for  this  loan,  a  payment  shall  be  made 
on  account  of  this  loan  upon  the  demand  of  the  holder  hereof,  so  that 

the  said  market  value  shall  always  be  at  least  per  cent,  more 

than  the  amount  unpaid  of  this  note,  and  that  in  case  of  failure  to 
make  such  payment,  this  note  shall,  at  the  option  of  the  holder  hereof. 


Forms  of  Pledges.  587 

become  due  and  payable  forthwith,  anything  hereinbefore  expressed  to 
the  contrary,  notwithstanding,  and  that  the  holder  may  immediately 
reimburse by  sale  as  hereinbefore  provided  of  the  said  prop- 
erty or  any  part  thereof.     In  case  the  net  proceeds  arising  from  any 

sale,  hereunder,  shall   be   less  than  the  amount   due  hereon 

promise  to  pay  to  the  holder,  forthwith  after  such  sale,  the  amount  of 
such  detic'iency  with  legal  interest. 

It  is  further  agreed  that  any  excess  in  the  value  of  such  collaterals, 
or  surplus  from  the  sale  thereof  beyond  the  amount  due  hereon,  shall 
be  applicable,  upon  any  other  note  or  claim  held  by  the  holder  hereof, 

against now  due  or  to  become  due,  or  that  may  be   hereafter 

contracted;    and  that,  if  no  other  note  or  claim  against  is  so 

held,  such  surplus,  after  the  payment  of  this  note,  and  the  expenses  of 
such  sale  shall  be  returned  to or assigns. 

It  is  further  agreed  that  upon  any  sale  by  virtue  hereof,  the  holder 
hereof  may  purchase  the  whole  or  any  part  of  such  property  discharged 
from  any  right  of  redemption,  which  is  hereby  expressly  released  to 
the  holder  hereof,  who  shall  retain  a  claim  against  the  maker  hereof 
for  any  deficiency  arising  upon  such  sale. 


Xo.  3. 
$ New  York, 189  ... 

without promise  to  pay  to or  order,  at  their 

oflSce,  in  the  city  of  N"ew  York,  the  sum  of  dollars,  for  value 

received,  with  interest  at  the  rate  of  percent,  per  annum,  pay- 
able     having  deposited   herewith,  and  pledged   as  collateral 

security  to  the  holder  hereof,  the  following  property,  viz. : with. 

authority  to  the  holder  hereof  to  sell  the  whole  of  said  property,  or  any 
part  thereof,  or  any  substitutes  therefor,  or  any  additions  thereto,  at 
any  Brokers' Board,  in  the  city  of  New  York,  or  at  public  or  private  sale 
in  said  city  or  elsewhere,  at  the  option  of  such  holder,  on  the  non- 
performance of  any  of  the  promises  or  agreements  herein  contained, 
without  notice  of  amount  claimed  to  be  due,  without  demand  of  payment, 
without  advertisement  and  without  notice  of  the  time  and  place  of 
sale,  each  and  every  of  which  is  hereby  expressly  w*aived. 

It  is  agreed  that  in  case  of  depreciation  in   the  market  value  of  the 

property  hereby  pledged   which   market  value  is   now  ($ ),  or 

which  may  hereafter  be  pledged  for  this  loan,  a  payment  shall  be 
made  on  account  of  this  loan  upon  the  demand  of  the  holder  hereof,  so 

that  the  said  market  value  shall  always  be  at  least per  cent,  more 

than  the  amount  unpaid  of  this  note,  and  that  in  case  of  failure  to  make 
such  payment,  this  note  shall,   at  the   option  of  the  holder  hereof,, 


588  The  J^aw  of  Pledge. 

become  due  and  payable  forthwith,  anything  hereinbefore  expressed  to 
the  contrary,  notwithstanding,  and  that  the  holder  may  immediately 

reimburse by  sale,  as  hereinbefore  ijrovided,  of  the  said  prop- 

■erty  or  any  part   thereof.     In  case  the  net  proceeds  arising  from  any 

sale,  hereunder,  shall  be  less  than  the    amount  due  hereon    

promise  to  pay  to  the  holder,  forthwith  after  such  sale,  the  amount  of 
5ueh  deficiency  with  legal  interest. 

It  is  further  agreed  that  any  excess  in  the  value  of  such  collaterals, 
•or  surplus  from  the  sale  thereof  bej-ond  the  amount  due  hereon,  shall 
be  applicable  upon  any  other  note  or   claim  held  bj'  the  holder  hereof, 

against now  due  or  to  become  due,  or  that  may  be  hereafter 

contracted;  and  that,  if  no  other  note  or  claim  against is  so 

lield,  such  surplus  after  the  payment  of  this  note  and  the  expenses  of 
such  sale  shall  be  returned  to or assigns. 

It  is  further  agreed  that  upon  any  sale  by  virtue  hereof,  the  holder 
hereof  may  purchase  the  whole  or  any  part  of  such  property  discharged 
from  any  right  of  redemption,  which  is  hereby  expressly  released  to  the 
holder  hereof,  who  shall  retain  a  claim  against  the  maker  hereof  for 
anv  deficiency  arising  upon  such  sale. 


Xo.  4. 
'$ Xew  York,  189.... 

On  Demand,    with   interest  at   per  cent,    per   annum,  we 

promise  to  pay  to  the  Bank  of ,  National  Banking  Associa- 
tion, or  Order  at  said  Bank,  dollars,  in  United  States  Gold  Coin, 

or  its  equivalent,  for  value  received,  having  deposited  with  said  Bank, 
as  collateral  security:  

If  the  market  value  of  said  securities,  or  of  any  hereafter  deposited 
therewith,  or  of  the  remainder  after  the  application  of  any  part  thereof 
to  any  other  note  or  claim,  shall  at  any  time  be  less  than  twenty  per  cent, 
beyond  the  amount  of  this  note  and  interest,  the  said  Bank  shall  have 
the  right  until  this  note  be  paid,  to  retain  and  apply  any  money,  col- 
laterals, securities  or  property  of  ours  of  any  kind,  that  it  may  then 
have  or  thereafter  acquire  to  make  good  the  deticiencv. 

In  case  of  the  non-payment  of  this  note,  according  to  its  terms,  we 
hereby  authorize  said  Bank  to  sell  said  collaterals,  securities  or  property, 
and  to  apply  the  aforesaid  money  and  the  net  proceeds  of  such  sale  to 
the  payment  of  this  note  and  interest  thereon;  such  sale  to  be 
made  at  the  Bank's  option,  without  notice,  at  the  Board  of  Brokers  or 
at  public  or  private  sale.  Any  amount  which  may  then  remain  due 
hereon  we  promise  to  pay  to  said  Bank,  forthwith  after  sueh  sale,  with 
.legal  interest. 


Forms  of  Pledges.  58^ 

It  is  further  agreed,  that  said  collaterals,  or  any  excess  in  the  value 
thereof,  or  any  surplus  from  the  sale  thereof,  beyond  the  amount  due 
hereon,  shall  be  applicable  upon  any  other  note  or  claim  held  by  said 
Bank  against  us,  and  for  that  purpose  may  be  sold  in  the  manner 
above  stated;  and  if  said  Bank  hold  no  other  note  or  claim  against 
us,  such  surplus  after  paj'ment  of  this  note,  shall  be  returned  to  us, 
and  in  case  of  any  exchange  of  or  addition  to  the  collaterals  above 
named,  the  provisions  of  this  note  shall  extend  to  such  new  or  addi- 
tional collaterals. 

It  is  also  understood  that  upon  any  sale  of  any  of  said  collaterals, 
said  Bank  may  become  the  purchaser  thereof  and  hold  the  same  there- 
after in  its  own  right,  absolutely  free  from  any  claim  of  ours. 


Xo.  5. 


Time. 
$ *  Xew  York, 189... 

after  date,  we  promise  to  pay  to  The  Bank  of ,  National 

Banking  Association,  or   order,  at  said  bank, dollars,  in  U.  S. 

gold  coin  or  its  equivalent,  for  value  received,  having   deposited  with 

said  bank  as  collateral  security ,  and  agreeing  that  if  the  market 

value  of  said  securities,  or  of  any  hereafter  deposited  therewith,  or  of 
the  remainder  after  the  apijlication  of  any  part  thereof  to  anj^  other 
note  or  claim,  shall  at  any  time  be  less  than  twenty  per  cent,  beyond 
the  amount  of  this  note  and  interest,  we  will  from  time  to  time  duly 
deposit  with  said  bank  further  collateral  security  of  sufficient  market 
value  to  maintain  such  margin  of  twenty  per  cent. ;  and  that  until 
such  further  deposit  be  made  or  this  note  be  paid  the  said  Bank  shall 
have  the  right  to  retain  and  apply  any  money,  collaterals,  securities  or 
property  of  ours  of  any  kind  that  it  may  then  have  or  thereafter  acquire, 
to  make  good  the  deficiency;  and  that,  if  such  further  deposit  be  not 
so  made  within  one  day  after  demand  thereof  by  said  Bank,  this  note' 
thereupon,  at  the  option  of  said  Bank,  shall  become  due  and  payable' 
forthwith. 

And  in  case  of  non-performance  of  this  promise  or  agreement,  we- 
hereby  authorize  said  Bank,  at  its  option,  to  sell  said  collaterals,  securi- 
ties or  property,  and  to  apply  the  aforesaid  money  and  the  net  proceeds 
of  such  sale  to  the  payment  of  this  note  and  interest  thereon,  such  sale- 
to  be  made,  at  the  Bank's  option,  without  notice,  at  the  Board  of  Brokers,, 
or  at  public  or  private  sale,  and  any  amount  which  may  then  remain  due' 
hereon,  we  promise  to  pay  to  said  Bank  forthwith  after  such  sale,  with 
legal  interest. 

It  is  further  agreed   that  said  collaterals   or  anv  excess  in  the  value 


590  The  Law  op  Pledge. 

thereof,  or  any  surplus  from  the  sale  thereof  beyond  the  amount  due 
hereon,  shall  be  applicable  upon  any  other  note  or  claim  held  by  said 
Bank  against  us,  and  for  that  purpose  may  be  sold  in  the  manner  above 
stated ;  and  if  said  Bank  hold  no  other  note  or  claim  against  us  such 
surplus  afler  payment  of  this  note,  shall  be  returned  to  us;  and  in  case 
'Of  any  exchange  of  or  addition  to  the  collaterals  above  named,  the  pro- 
visions of  this  note  shall  extend  to  such  new  or  additional  collaterals. 

It  is  further  agreed  that,  in  the  event  of  any  suspension,  failure  or 
assignment  for  the  benefit  of  creditors  on  the  part  of  the  undersigned, 
this  obligation  shall  thereupon,  at  the  option  of  the  said  Bank  with  or 
without  notice,  immediately  mature  and  become  due  and  payable. 

It  is  also  understood  that  upon  any  sale  of  any  of  said  collaterals,  said 
Bank  may  become  the  purchaser  thereof,  and  hold  the  same  thereafter 
in  its  own  right,  absolutely  free  from  any  claim  of  ours. 


No.  Gr 
$ Boston, 189... 

On  demand,  after  date,  for  value  received,  with  interes*"  at   the  rate 

■of per  cent,  per  annum,  promise  to  pay  to 

National  Bank  of  Boston,  or  order,  at  its  place  of  business,  

dollars,  having  deposited  herewith    as   collateral   security,  , 

with  authority  to  sell  the  same,  or  any  collaterals  substituted  for 
or  added  to  the  above,  without  notice,  either  at  public  or  private  sale, 

•or  otherwise,  at  the  option  of  the  said  National  Bank,  on  the 

non-performance  of  this  promise,  said  Bank  applying  the  net  proceeds 

to  the  payment  of  this  note,  and  accounting  to for  the  surplus, 

if  any;  and  it  is  hereby  agreed  that  such  surplus,  or  any  excess  of  col- 
laterals iipon  this  note,  shall  be  applicable  to  any  other  note  or  claim 

against held  by  said  Bank.     Should  the  market  value  of  any 

security  pledged  for  this  loan,  in  the  judgment  of  the  holder  or  holders 

hereof,  decline,  hereby  agree  to  deposit  on  demand  (which 

may  be  made  by   a  notice  in  writing  sent  by  mail  or  otherwise  to 

residence  or  place  of  business),  additional  collateral,  so  that 

the  market  value  shall  always  be  at  least per  cent,  more  than 

the  amount  of  this  note;  and  failing  to  deposit  such  additional  secur- 
ity, this  note  shall  be  deemed  to  be  due  and  paj-able  forthwith,  anything 
herein  before  expressed  to  the  contrary  notwithstanding,  and  the  holder 
or  holders  may  immediately  reimburse  themselves  by  the  sale  of  the 
security;  and  it  is  hereby  agreed  that  the  holder  or  holders  of  this  note, 
or  any  person  in  his  or  their  behalf,  may  purchase  at  any  such  sale. 


Forms  of  Pledges.  591 

Xo.  7. 

$ Boston, 189.... 

without  grace,  promise  to  pay  to ,  or  order, 

at  their  office,  in  the  city  of  Boston,  the  sum  of  dollars,  value 

received,  with  interest  at  the  rate  of per  cent,  per  annum,  pay- 
able   having  deposited  herewith,  as  collateral  security  for  the 

payment  of  this  note  and  for  all  other  indebtedness,  whether  direct  or 

indirect,   which i«ay  from  time  to  time  incur,  to  said , 

the  following  property,  namely  :  

Until  the  payment  of  this  note  and  such  other  indebtedness  the  hold- 
ers hereof  may,  at  their  option,  use  or  hypothecate  all  or  any  of  said 
property  for  their  own  use;  and  upon  default  in  the  payment  of  this 
note  or  such  other  indebtedness,  or  in  the  performance  of  any  of  the 
promises  herein  contained,  the  holders  hereof  are  authorized  to  sell  all 
said  property,  or  any  part  thereof,  or  any  substitute  therefor,  or  any  ad- 
ditions thereto,  at  one  or  more  sales,  at  any  Broker's  Board  in  the  city 
of  Boston,  or  at  public  auction  or  private  sale  in  said  city  or  else- 
where, at  the  option  of  such  holders,  without  notice  of  amount  claimed 
to  be  due,  without  demand  of  payment,  without  advertisement  and 
without    notice  of  the  time  and  place  of    sale,   each   and  every  of 

which  is  hereby  expressly  waived.     On  death  this  note  shall 

be  deemed  at  once  due  and  payable ;  and  the  holders  hereof  may  exer- 
cise the  above  power  of  sale,  without  notice  or  demand,  and  before 
as  well  as  after  the  appointment  of  an  executor  or  administrator  of 
estate. 

In  case  of  a  depreciation  in  the  market  value  of  the  property  hereby 

pledged,  which  market  value  is  now  $ ,  or  which  may  hereafter 

be  pledged  for  this  loan,  agree  to  furnish  additional  security 

satisfactory  to  the  holders  hereof,  without  demand  or  notice,  so  that 
the  market  value  of  the  property  held  as  security  hereunder  shall 

always  be  at  least per  cent,   more  than  the  amount  hereof. 

And,  upon  failure  to  furnish  such  additional  security,  this  note  shall, 
at  the  option  of  said  holders,  be  deemed  to  be  due  and  payable  forth- 
with, anything  herein  expressed  to  the  contrary  notwithstanding;  and 
said  holders  may  immediately  reimburse  themselves  by  sale  of  said 
property  or  any  part  thereof  as  hereinbefore  provided. 

In  case  the  net  proceeds  arising  from  any  sale  hereunder  shall  be  less 

than  the  amount  due  hereon,  promise  to  pay  to  the  holders 

hereof  forthwith  after  such  sale  the  amount  of  such  deticiency  with 
legal  interest. 

It  is  further  agreed  that,  if  the  net  proceeds  received  from  any  sale 
hereunder  exceed  the  amount  due  hereon,  such  excess  shall  be  appli- 
cable upon  any  other  indebtedness,  whether  then  or  thereafter  to  become 
due  from to  said ;   and  the  balance  of  such  proceeds, 


592  The  Law  of  Pledge. 

after  the  payment  of  the  amount  due  hereon,  and  the  satisfaction  of  all 

other  indebtedness,  shall  be  returned  to or assigns. 

It  is  further  agreed  that  upon  any  sale  by  virtue  hereof  the  holders 
hereof  may  purchase  the  whole  or  any  part  of  said  property  discharged 
from  any  right  of  redemption,  which  is  hereby   expressly  released  to 

the  holders  hereof,  who  shall   retain  a  claim  against for  any 

deficiency  arising  from  such  sale. 


Xo.  8. 

Boston, 189. 


after  date,  for  value  received, 

as  principal  and 

as  sureties,  jomtly  and  severally  promise  to  pay  to 

Trust  Company  or  order,  at  its  place  of  business  in  Boston, 

dollars,  having  deposited  with   this   obligation  as  collateral  security 

with  authority  to  sell  the  same,  or  any 

collaterals  substituted  for  or  added  to  the  above,  without  notice,  either 

at  public  or  private  sale,  or  other\\ise,  at  the  option  of  the  said 

Trust  Company,  on  the  non-performance  of  this  promise,  said  trust 
company  applying  the  net  proceeds  to  the  payment  of  this  note  and 

accounting  to for  the    surplus,  if  any; 

and  it  is  hereby  agreed  that  such  surplus,  or  any  excess  of  collaterals 
upon  this  note,  shall  be   applicable  to  any  other  note  or  claim  against 

held  by  said  trust  company.   Should  the 

market  value  of  any  security  pledged  for  this  loan,  in  the  judgment 

of  the  holder  or  holders  hereof,  decline, 

hereby  agree  to  deposit  on  demand  (which  may  be  made  by  a  notice  in 

writing  sent   by   mail  or  otherwise  to 

residence  or  place  of  business)  additional  collateral,  so  that  the  market 

value  shall  always  be  at  least ...per  cent,  more  than  the  amount  of 

this  note;  and  failing  to  deposit  such  additional  security,  this  note 
shall  be  deemed  to  be  due  and  payable  forthwith,  anything  hereinbe- 
fore expressed  to  the  contrary  notwithstanding,  and  the  holder  or 
holders  may  immediately  reimburse  themselves  by  the  sale  of  the 
security  as  aforesaid;  and  it  is  hereby  agreed  that  the  holder  or 
holders  of  this  note,  or  any  person  in  his  or  their  behalf,  may  purchase 
at  any  such  sale. 


Forms  of  Pledges.  593 

No.  9. 

$ Philadelphia, 189... 

On  demand,  for  value  received,  promise  to  pay  to  tlie  order 

of   Dollars,   witti   interest,    having    deposited    as    collateral 

security  for  payment  of  tliis  or  any  other  liability  or  liabilities  to  said 
holder  hereof,  due  or  to  become  due,  or  that  may  be  hereafter  con- 
tracted, the  following  property,  viz.:  with  the  right  on  the 

part  of  the  holder  hereof,  to  repledge  the  securities  above  mentioned, 
or  to  substitute  or  exchange  for  the  same  other  certificates  of  like 
tenor  and  amount,  and  also  from  time  to  time  to  demand  additional 
collateral  security,  and  upon  failure  to  comply  with  any  such  demand, 
this  obligation  shall  forthwith  become  due,  with  full  power  and  au- 
thority, to  the  holder  hereof,  or  assigns,  in  case  of  such  default,  or  of 
the  non-payment  of  any  of  the  liabilities  above  mentioned  at  maturity, 
to  sell,  assign  and  deliver  the  whole,  or  any  part  of  such  securities,  or 
any  substitutes  therefor  or  additions  thereto,  at  any  broker's  board,  or 
at  public  or  private  sale,  at  their  option,  at  any  time  or  times  there- 
after, without  advertisement  or  notice  to  the  undersigned,  and  with 
the  right  on  the  part  of  the  holder  hereof,  to  become  purchaser  thereof 
at  such  sale  or  sales,  freed  and  discharged  of  any  equity  of  redemp- 
tion. And  after  deducting  all  legal  or  other  costs  and  expenses  for 
collection,  sale  and  delivery,  to  apply  the  residue  of  the  proceeds,  of 
such  sale  or  sales  so  made,  to  pay  any,  either  or  all  of  said  liabilities, 
as  said  holder  hereof  shall  deem  proper,  returning  the  overplus  to  the 
undersigned;  and  the  undersigned  will  still  remain  liable  for  any 
amount  so  unpaid.     It  being  further  understood  and  agreed  that  The 

National  Bank  of  Philadelphia  shall  have  a  like  lien  upon 

any  and  all  funds,  stocks,  bonds,  notes,  and  other  propei'ty  at  anytime 
in  the  hands  of  the  said  bank  belonging  to  the  maker,  or  endorser  or 
endorsers,  or  guarantor  or  guarantors  hereof,  as  security  for  this  note 
and  for  any  and  all  liability  or  liabilities  matured  or  unmatured,  of 
such  maker,  endoi'ser  or  endorsers,  guarantor  or  guai'antors  to  said 
bank,  which  lien  shall  be  enforceable  in  like  manner  and  shall  be  sub- 
ject to  all  the  provisions  herein  above  and  before  mentioned  and  set  out. 

Payable  at  The National  Bank. 


No.  10. 

$ Philadelphia, 189   . 

after  date,  for  value  received,  promise  to  pay  to  the 

order  of dollars,  having  deposited  as  collateral  security  for  pay- 
ment of  this  or  any  other  liability  or  liabilities  to  said  holder  hereof, 


594  The  Law  op  Pledge. 

due  or  to  become  due,  or  that  may  be  hereafter  contracted,  the  follow- 
ing property,  viz. :  with  the  right  on  the  part  of  the  holder 

hereof,  to  repledge  the  securities  above  mentioned,  or  to  substitute  or 
exchange  for  the  same  other  certificates  of  like  tenor  and  amount,  and 
also  from  time  to  time  to  demand  additional  collateral  security,  and 
upon  failure  to  comply  with  any  such  demand,  this  obligation  shall 
forthwith  become  due,  with  full  power  and  authority,  to  the  holder 
hereof,  or  assigns,  in  case  of  such  default,  or  of  the  non-payment  of 
any  of  the  liabilities  above  mentioned  at  maturdty,  to  sell,  assign  and 
deliver  the  whole,  or  any  part  of  such  securities,  or  any  substitutes 
therefor  or  additions  thereto,  at  any  broker's  board,  or  at  public  or 
private  sale,  at  their  option,  at  any  time  or  times  thereafter,  without 
advertisement  or  notice  to  the  undersigned,  and  with  the  right  on  the 
part  of  the  holder  hereof,  to  become  purchaser  thereof  at  such  sale  or 
sales,  freed  and  discharged  of  any  equity  of  redemption.  And  after 
deducting  all  legal  or  other  costs  and  expenses  for  collection,  sale  and 
delivery,  to  apply  the  residue  of  the  proceeds  of  such  sale  or  sales  so 
made,  to  pay  any,  either  or  all  of  said  liabilities,  as  said  holder  hereof 
shall  deem  proper,  returning  the  overplus  to  the  undersigned;  and  the 
undersigned  will  still  remain  liable  for  any  amount  so  unpaid.     It  being 

further  understood  and    agreed  that   The  National  Bank  of 

Philadelphia  shall  have  alike  lien  upon  any  and  all  funds,  stocks,  bonds, 
notes,  and  other  property  at  any  time  in  the  hands  of  the  said  Bank 
belonging  to  the  maker,  or  endorser  or  endorsers,  or  guarantor  or 
guarantors  hereof,  as  security  for  this  note  and  for  any  and  all  liability 
or  liabilities,  matured  or  unmatured,  of  such  maker,  endorser  or 
endorsers,  guarantor  or  guarantors  to  said  Bank,  which  lien  shall  be 
enforceable  in  like  manner  and  shall  be  «ubject  to  all  the  provisions 
herein  above  and  before  mentioned  and  set  out. 

Payable  at  The National  Bank. 


No.  11. 

$ Philadelphia,  ,  189... 

after  date,  for  value  received  promise  to  pay  to  the 

order  of  dollars,  having   deposited  as   collateral  security  for 

payment  of  this  or  any  other  liability  or  liabilities  to  said  holder  hereof, 
due  or  to  become  due,  or  that  may  be  hereafter  contracted,  the  following 

property,  viz. :  with  the  right  ou  the  part  of  the  holder  hereof, 

to  repledge  the  securities  above  mentioned,  or  to  substitute  or  exchange 


Forms  op  Pledges.  595 

for  the  same,  other  certiflcates  of  like  tenor  and  amount,  and  also  from 
time  to  time  to  demand  additional  collateral  security,  and  upon  failure 
to  comply  with  any  such  demand,  this  obligation  shall  forthwith  become 
due,  with  full  power  and  authority,  to  the  holder  hereof,  or  assigns,  in 
case  of  such  default,  or  of  the  non-payment  of  any  of  the  liabilities 
above  mentioned  at  maturity,  to  sell,  assign  and  deliver  the  whole  or 
any  part  of  such  securities,  or  any  substitutes  therefor  or  additions 
thereto,  at  any  broker's  board,  or  at  public  or  private  sale,  at  their 
option,  at  any  time  or  times  thereafter,  without  advertisement  or  notice 
to  the  undersigned,  and  with  the  right  on  the  part  of  the  holder  hereof, 
to  become  purchaser  thereof  at  such  sale  or  sales,  freed  and  discharged 
of  any  equity  of  redemption.  And  after  deducting  all  legal  or  other 
costs  and  expenses  for  collection,  sale  and  delivery,  to  apply  the  residue 
of  the  proceeds  of  such  sale  or  sales  so  made,  to  pay  any,  either  or  all 
of  said  liabilities,  as  said  holder  hereof  shall  deem  proper,  returning  the 
overplus  to  the  undersigned;  and  the  undersigned  will j still  remain  lia- 
ble for  any  amount  so  unpaid.     It  being  further  understood  and  agreed 

that  The National  Bank  of  Philadelphia  shall  have  a  like  lien 

upon  any  and  all  funds,  stocks,  bonds,  notes,  and  other  property  at  any 
time  in  the  hands  of  the  said  bank  belonging  to  the  maker,  or  endorser 
or  endorsers,  or  guarantor  or  guarantors  hereof,  as  security  for  this  note 
and  for  any  and  all  liability  or  liabilities,  matured  or  unmatured,  of 
such  maker,  endorser  or  endorsers,  guarantor  or  guarantors  to  said 
bank,  which  lien  shall  be  enforceable  in  like  manner  and  shall  be  sub- 
ject to  all  the  provisions  herein  above  and  before  mentioned  and  set 
out. 

Payable  at  The National  Bank. 


No.  11— E7idorsed  on  Back. 

For  value  received,   hereby  assign,  transfer  and  set  over  to 

The National  Bank  of  Philadelphia,  or  order,  a  promissory  note 

drawn  by ,  to  the  order  of  ,  for  dollars,  dated 

,  payable  after  date;  and  do  also  assign  to 

the  said  The National  Bank  of  Philadelphia,  or  order,  all  right, 

title  and  interest  in  the  collateral  and   moneys  mentioned  in  the   said 

note,  and  hereby  guarantee  the  prompt  payment  of  the  said 

note,  at  the  maturity  thereof,  whether  such  maturity  occurs  by  expira- 
tion of  time,  or  for  any  other  cause,  as  mentioned  in  the  said  note. 
And  this  guarantee  is  made  expressly  subject  to  all  the  terms,  condi- 
tions, and  provisions  of  the  said  note. 


596  The  Law  op  Pledge. 

No.  12. 


Baltimore, ,  189. 


for  value  received, promise  to  pay  to  The 

National  Bank,  or  order,  at  said  bank,  dollars,  with  

having  deposited  with  said  bank  as  collateral  security  for  the  payment 

of  this  note ...,  with  such  additional  collaterals  as  may  from  time 

to  time  be  required  by  its  president  or  cashier,  and  which  additional 
collaterals  we  hereby  promise  to  give  at  any  time,  on  demand.  If  these 
additional  collaterals  be  not  so  given  when  demanded,  then  this  note 
to  be  due,  and  rebate  of  interest  taken  shall  be  allowed  on  payment 
prior  to  maturity.  And  hereby  give  to  said  bank,  its  presi- 
dent or  cashier,  full  power  and  authority  to  sell  and  assign  and  deliver 
the  whole  or  any  part  of  said  collaterals,  or  any  substitutes  therefor,  or 
any  additions  thereto,  at  any  Brokers'  Board  or  elsewhere,  at  public 
or  private  sale,  at  the  option  of  said  bank,  or  its  president  or  cashier, 
or  either  of  them,  on  the  non-performance  of  the  above  promises,  or 
any  of  them,  or  at  any  time  thereafter,  and  without  advertising  or 

giving  to  any  notice,  or  making  any  demand  of  payment. 

And also  agree  to  pay  all  legal  or  other  costs  and   expenses 

for  collection  of  this  note,  or  sale  and   delivery  of  the  collateral,  and 

should  any  deficiency  remain, farther  promise  and  agree  to 

pay  the  same  to  the  holder  hereof  on  demand. 

It  is  also  agreed,  that  said  collaterals  may  from  time  to  time,  by 
mutual  consent,  be  exchanged  for  others,  which  shall  also  be  held  by 

said  bank  on  the  terms  above  set  forth,  and  that  if  shall  come 

under  any  other  liability,  or  enter  into  any  other  agreement  with  said 
bank  while  it  is  the  holder  of  this  obligation,  that  the  net  proceeds  of 
sale  of  the  above  securities  may  be  applied  to  this  note,  and  any  other 
liabilities  or  engagements  held  by  said  bank. 


No.  13 

New  Orleans ISO. 


after  date  promise  to  pay  to 

the  order  of at Bank  of  New  Orleans,  dol- 
lars, for  value  received,  with  interest  at  the  rate  of  per  cent. 

per  annum,  from until  paid. 

The  securities  mentioned  on  the  reverse  hereof  are  hereby  pledged  and 
delivered  to  secure  payment  of  this  note.  Should  said  securities  decline 
in  value,  the  maker  of  this  note  hereby  agrees,  within  twenty-four 
hours  from  demand  to  that  effect  by  the   holder,  to  pledge  additional 


EoRMS  OiF  Pledges.  597 

securities  satisfactory  to  the  holder,  to  cover  such  decline.  Failure  or 
refusal  to  comply  with  this  demand  shall  at  once  mature  this  note  and 
pledge.  On  maturity  of  this  note,  either  by  its  terms  or  on  account  of 
the  failure  to  make  good  any  decline  in  value  of  the  pledged  securities, 
the  holder  is  hereby  authorized  to  sell  said  securities  at  public  or 
private  sale,  without  recourse  to  judicial  proceedings,  and  to  make 
any  transfers  of  stock  or  other  property  that  may  be  required  to  effect 
such  sale,  and  to  apply  the  proceeds  thereof  to  the  payment  of  this 
note  and  of  any  costs,  and  attorney's  fees  that  may  be  incurred,  and 
the  remainder,  if  any,  to  the  payment  of  any  other  indebtedness, 
whether  matured  or  not  matured,  up  to  the  amount  of  two  hundred 
and  fifty  thousand  dollars  owed  by  the  maker  hereof  to  this  bank. 
The  holder  of  this  note  shall  have  the  right  to  purchase  the  pledged 
securities  at  their  market  value,  or  at  any  judicial  or  auction  sale  there- 
of, or  when  sold  on  the  Stock  Exchange.  The  drawer  agrees  to  pay 
attorney's  fees,  estimated  at  5  per  cent,  on  the  amount  of  this  note 
and  secured  by  this  pledge,  in  case  of  the  employment  of  an  attorney 
to  enforce  this  note  or  pledge.  At  the  maturity  of  this  note,  any  money 
on  deposit,  or  otherwise  to  the  credit  of  the  maker,  on  the  books  of 
said  Whitney  National  Bank,  shall  at  once  stand  applied  to  tho  pay- 
ment of  this  note,  unless  otherwise  paid. 
Due 


No.  14. 
$ New  Orleans,  La., ,  189... 

after  date promise  to  pay  to  the  order  of  at 

the  National  Bank  of  New  Orleans,  dollars,  for  value  received, 

with  interest  thereon  at  the  rate  of per  cent,  per  annum  from 

until  paid. 

This  note  is  secured  by  pledge  and  delivery  of  the  securities  men- 
tioned on  the  reverse  hereof.  Should  said  securities  decline  in  value, 
the  maker  of  this  note  hereby  agrees,  within  twenty-four  hours  from 
demand  on  him  to  that  effect  made  by  the  holder  of  this  note,  to  furnish 
and  pledge  additional  securities,  satisfactory  to  the  holder  of  the  note, 
to  cover  such  decline.  And  the  failure  or  refusal  by  the  maker  to 
furnish  such  additional  securities  when  so  called  for  shall  at  once 
mature  this  note  and  pledge. 

Should  this  note  not  be  paid  at  maturity,  or  when  it  becomes  due  by 
failure  to  furnish  additional  securities  as  above  provided  or  for  any 
other  reason,  the  then  holder  thereof  is  hereby  authorized  to  sell  the 
pledged  securities,  at  public  or  private  sale,  without  recourse  to  judicial 
proceedings,  and  is  hereby  irrevocably  authorized  to  transfer  any  shares 


598  The  Law  of  Pledge. 

of  stock,  or  other  securities,  on  the  books  of  the  company  issuing  same, 
to  purchaser  under  such  public  or  private  sale.  The  proceeds  of  the  sale 
of  said  pledged  securities  shall  be  applied  (1)  to  thei^aj'ment  of  all  costs 
and  commissions  for  selling,  {2)  to  the  payment  of  this  note,  in  princi- 
pal, and  interest  and  the  5  per  cent,  attorney  fees,  below  stipulated,  (3) 
to   the  payment  of  any  other  indebtedness,  then   due  or  thereafter  to 

become  due,  by  the  maker  of  this  note  to  the  said XationalBank 

up  to  the  sum  of  $100,000.  The  holder  of  this  note  shall  have  the  right  to 
l^urchase  the  pledged  securities  at  their  market  value,  if  there  is  any  mar- 
ket value,  or  at  any  judicial  or  auction  sale  thereof,  or  when  sold  on  the 
Stock  Exchange  of  Xew  Orleans.  Should  this  note  not  be  paid  at 
maturity  or  when  due  as  above,  or  should  it  become  necessary  to 
employ  an  attorney  to  make  or  enforce  the  same,  or  should  this  note  be 
placed  in  the  hands  of  an  attorney  for  collection,  the  maker  shall 
pay  the  fees  of  such  attorney  to  be  estimated  at  5  per  cent,  on  the 
amount  then  due  on  this  note,  which  attorney's  fees  are  secured  by  this 
pledge.  At  the  maturity  of  this  note,  or  v/hen  otherwise  due,  as  above 
provided,  any  money  on  deposit  or  otherwise  to   the  credit  of  the 

maker  on  the  books  of  said National  Bank,  shall  at  once  stand 

applied  to  the  payment  of  this  note,  unless  it  be  otherwise  paid. 
Due  


Xo.  1.5. 
$ New  Okleaks, 189.... 

after  date promise  to  pay  to  the  order  of  The _ 

of  Louisiana,  at  its  banking  house,  No street.  New  Orleans, 

dollars,  for  value  received  with  interest  at  the  rate  of  eight  per  cent,  per 
annum  from  maturity  until  paid. 

This  note  is  secured  by  pledge  of  the  .securities  mentioned  on  the 
reverse  hereof,  with  the  right  to  call  for  additional  security  should  the 
same  decline,  and  on  failure  to  respond,  this  obligation  shall  be  deemed 
to  be  due  and  payable  on  demand.  With  full  power  and  authority  to 
sell,  and  assign,  and  deliver,  the  whole  of  the  said  property,  or  any  part 
thereof,  or  any  substitutes  therefor,  or  any  addition  thereto,  at  any 
broker's  board,  or  at  public  or  private  sale,  at  the  option  of  said  bank, 
on  the  non-performance  of  this  promise,  and  without  further  notice, 
applying  the  net  proceeds,  first,  to  the  payment  of  this  note,  interest  and 
cost  of  the  sale,  and  the  balance,  at  the  option  of  the  bank,  to  any  other 
liability  to  the  bank  now  existing  or  which  may  hereafter  accrue,  and 
accounting  to  me  for  the  surplus,  if  any,  and  I  hereby  agree  to  pay 
attorney's  fees  of  five  per  cent,  on  the  amount  sued  for,  or  recovered  with- 
out suit,  by  sale  or  collection  of  the  securities,  in  case  of  suit  or  legal 


Forms  of  Pledges.  599 

services  in  or  out  of  court.  It  is  furtlier  agreed  that  the  pledgee  shall 
have  the  right  to  buy  in  the  said  securities  at  market  rate  at  said  private 
or  public  sale.  It  is  further  agreed  that,  independently  of  the  right  to 
sell  the  said  securities,  the  bank,  at  the  maturity  of  this  note,  and  on  ray 
default  to  pay  same,  shall  have  the  right  immediately  to  apply  any  sum 
or  balance  to  my  credit,  on  its  books,  to  the  payment  of  said  note,  inter- 
est and  costs. 


Due Address 


ISTo.  16. 


New  Orleans,  La., ,  189 


after  date  for  value  received,  promise  to  pay  to  the 

order  of  the Bank,  dollars,  with  interest  at  the  rate  of 

eight  per  cent,  from  maturity  until  paid,  having  pledged  as  col- 
lateral security  for  the  payment  of  this  note,  and  any  other  lia- 
bility to  said  Bank  to  the  extent  of  collaterals  the  following  property : 

,  with  the    right  to  call  for  additional    security  should  the 

same  decline,  and  on  failure  to  respond,  this  obligation  shall  be 
deemed  to  be  due,  and  payable  on  demand,  less  the  rebate  for 
the  unexpired  term.  With  full  power  and  authority  to  sell,  and 
assign,  and  deliver,  the  whole  of  the  said  property,  or  any  part 
thereof,  or  any  substitutes  therefor,  or  any  addition  thereto,  at  any 
Broker's  Board,  or  at  public  or  private  sale,  at  the  option  of  said  Bank, 
on  the  non-performance  of  this  promise,  and  without  further  notice, 
applying  the  net  proceeds,  first,  to  the  payment  of  this  note,  and  the 
balance,  at  the  option  of  the  Bank,  to  any  other  liabilitj%  and  account- 
ing to  for  the  surplus,  if  any. 

Payable  at 


INDEX. 

Reference  is  to  sections;  where  reference  is  made  in  index   to   any   subject,   and   a 
number  is  not  given,  the  refertnce  is  to  the  heading  in  the  index  itself. 


ARTIST. 

Section. 

May  pledge  executed  work;  delivery  of  pledge  and  rights  of 
pledgee ^"^ 

ASSESSMENT,  On  Stock  Pledged. 

Pledgeor  bound  for  them  when  paid  by  pledgee -«, 274 

ASSIGNMENT,  Of  Choses  in  Action.  (See  Incorporeal  Rights.) 

Distinction    between in  full    ownership    or    for  pledge  as 

security 105,  106,  108 

Of  bill  of  lading,  efiect  of 108 

In  Bankruptcy— See  Syndic. 

ATTACHMENT. 

Gives  creditor  tacit  pledge  or  lien  on  property  attached 531,  533 

ATTORNEY. 

Has  lien  for  his  fee  on  property  recovered  for  client 538 

AUTHOR. 

May  pledge  executed  work;  delivery  of  pledge  and  rights  of 
pledgee "'^ 

BAILEE.     (See  Pledgee.) 

BAILMENT.     (See  Pledge,  Delivery,  Possession.) 

BAILOR.     (See  Pledgeor.) 

BANKRUPTCY,  Of  Pledgeor.      (See  Syndic.) 

Does  not  impair  rights  of  pledgee ^^^J^}  ^.?^n 

Does  not  revoke  his  power  of  attorney  to  sell  pledge 27b,  2bO 

BELGIUM.     (See  Policies  of  Insurance.) 

Bill  of  lading  in is  negotiable,  and  bona  fide  vendee   or 

pledgee  has  perfect  title 360 

BILL  OF  LADING.     (See  Warehouse  Receipts.) 

Effect  of  transfer  of  for  pledge 108 

Delivery  of  in  Louisiana  made  by  mailing 145 

And  consignee's  privilege  primes  vendor's 145 

Is  not  symbol  of  goods,  but  muniment  of  title o61 

601 


602  Index. 

BILL  OF  LADING— Continued. 

Section. 

Holder  of has  constructive,  corporeal,  vicarious  possession 

of  goods 331 

Pledge  of actually  pledges  the  goods 331 

But  pledgee  of is  not  owner  of  goods 332.  333 

Pledgee  has  only  a  qualified  property  in  goods 334.  335 

And  is  entitled  to  delivery  and  possession  of  goods .336 

In  France  and  Louisiana made  to  a  designated  individual  is 

not  negotiable,   and  its   pledge  not   valid  against  owner  or 

vendor  of  goods 337,  338 

Under  commercial  law is  only  quasi  negotiable 339  to  355 

Aliter  under  civil  law 356  et  seq. 

Under  law  merchant,  pledgeor  or  vendor  of transferred  only 

title  he  possessed 339,  340 

Pledgee  or  vendee  obtains  only  rights  of  transferror 341 

Statutory  enactments  to  extend  negotiability  of 342  to  353 

Give  qualified  negotiability  in  England.' 342.  344.  345 

Louisiana ." 344  to  351 

Missouri 348 

California 353 

Wisconsin 353 

Give  peifect  negotiability  in  Maryland 343,  346,  352 

Juprisprudence  in  Federal  court  give qualified  negotia- 
bility  345,348 

But   if  owner  has   conferred  authority  on  transferror,  pledgee 

obtains  valid  pledge 355 

In  France,  Italy,  Belgium  and  Holland have  perfect  nego- 
tiability  and   bona  fide  pledgee  or  vendee  has  title  against 

owner 360 

Conflict  of  law,  arising  fi-om  difference  of  principle 361,  362 

Bill  of  lading  is  receipt  for  goods  and  contract  of  affreight- 
ment  364 

Performance  of  contract  is  at  place  of  delivery  of  goods 

364,  369  et  seq. 
Doctrine  that   Jex  loci  contractus  controls   unless    contrary 

intention  is  manifested 360  to  368,  376,  377 

Criticism  of  the  docti-ine 378  to  385 

Consequences  flowing  from  rule  that  lex  loci  solutionis  or 

contractus  governs 364.  365 

The    law    applicable    to    the    bill    of    lading  controls    its 
pledge .7. 369,  381  to  385 

BROKEE.    (See  Stocks.) 

Is  pledgee  of  margins  deposited  with  him 9,  470,  471 

Pledge  extends    to   stocks    and    merchandise  bought  bj'  and 

delivered  to  him 470,  478 

But  does  not  extend  to  property  not  delivered,  as  in  purchase 

of  "  futures  " 478,  479 

Contract  of  pledge  is  established  by  implication..470,  471,  475  to  478 

Obligations  of and  purchaser 471 

Criticism  of  rule  that  relation  between and  customer  is  one  of 

pledge  and  not  of  agency 472,  475,  477  to  479 

Admissibility  of  custom  to  show  nature  of  relation 472  to  475 

Eight  of to  repledge  stocks  held  for  customer 473,  474 

CALIFOENIA.     (See  Bills  of  Lading.) 


Index.  603 

CASAREGIS. 

Sfxtion. 
Quotation  from 357 

CHATTEL  MORTGAGE. 

Distinction  between and  pledge 87,  88,  101 

Not  linown  to  civil  law 89 

In  Louisiana is  sometimes  effective  as  pledge  Ill,  112,  123 

CHECKS. 

When  drawn  against  designated  fund  create  an  equitable   lien 
on  the  fund 549 

CHOSE  IN  ACTION.  (See  Incorporeal  Rights,  Inheritance,  Policy  of 
Insurance,  Bill  of  Lading,  Warehouse  Receipts,  Negotiable  Paper.) 

CIVIL  LAW. 

Origin  and  definition  of  pignns,Jichicia,  hypotheca 544  to  546,  552 

For  detailed   distinctions  between and  common  law — see 

"Common  Law  '" 

COMMERCIAL  PLEDGES.  (See  Negotiable  Paper,  Bill  of  Lading, 
Policy  of  Insurance,  Warehouse  Receipts,  Law  Merchant.) 

Law  of in  France,  Germany  and  the  Netherlands 325  to  330 

COMMON  CARRIER. 

Has  lien  on  goodsfor  freight  earned  in  carriage 519,  538 

COMMON  LAW,  THE. 

Mortgage  and  pledge  not  clearly  distinguished  in 39  et  seq. 

Distinction  Between and  Civil  Law. 

In  pledge  of  incorporeal  rights 11,  12,  18, 153,  154 

Necessity  of  notice  in  seizure  of  incorporeal  rights,  14,  153,  533 

Pledge  of  inheritance 40  to  55 

Possession  of  incorporeal  rights 163 

Prescription  of  debts 187  to  193,  195  to  198 

Prescription  of  ownership  of  pledge 176  to  186 

Contract  of  pledge,  suretyship  and  mortgage 188  et  seq. 

Arises  from  difference  in  controlling  principle 193 

Possession  of  personal  property  other  than  bills,  notes,  etc. 

200,  201 

Use  of  thing  pledged 202  et  seq. 

Pledge  of  another  person's  property 231  etseq. 

Right  of  pledgeor's  creditors,  other  than  pledgee,  to  seize 

pledge 255  to  259 

Where  pledgee  has  been  deceived  in  thing  pledged  ...275  to  277 

Revocation  by  death  of  mandate  to  sell  pledge 281  to  289 

Rights  of  pledgee   of  bill   of  lading  against  true  owner, 

where  another  i.s  pledgeor 339  et  seq. 

Stipulations   of  bill   of   lading,  application  of  lex  loci  con- 
tractus or  sohttionis 364  to  385 

Seizure  of  pledge  by  ordinary  creditor 255  to  260 

Righls  of  factors,   agents  and  pledgees  of  personal  prop- 
erty   480,  481,  498  et  seq. 

Rights  conferred  by  possession  of  personal  property.  504  et  seq. 


604  Index. 

COMMON  LAW— Continued. 

Section. 

Lien  at  common  law  and  tacit  pledge  under  civil  law.. 518  to  537 

Lessor's  right  of  pledge ..523  to  542 

See  Personal  propertj-.  Pledge,  Pledgee,  Pledgeor,  Policies 
of  Insurance,  Possession,  Power  of  Attorney,  Prescription, 
Privileges,  Redemption,  Sale,  Seizure,  Tacit  Pledge,  Use. 

CONFLICT  OF  LAW. 

Arising  from  different  rules  governing  stipulations  of  bill  of 
lading 361,  362 

Bill  of  lading  is  receipt  for  goods  and  contract  of  affreight- 
ment   364 

Performance    of   contract   is    at   place  of    delivery  of   goods 

364,  369  et  seq. 

Doctrine  that  lex  loci  contractus  controls,  unless  contrary  inten- 
tion is  manifested 366,  368,  376,  377 

Criticism  of  the  doctrine 378,  385 

Consequences  flowing  from  rule  that  lex  loci  contractus  or  sohi- 
tionis  governs 364,  365 

The  law  applicable  to  the  bill  of  lading  controls  its  pledge, 

369,  381  to  385 

CONSTRUCTIVE  DELIVERY.     (See  Delivery.) 

CONTRACT.    (See  Obligations  for  special  class  of as  Sale,  Bill  of 

Lading,  Policy  of  Insurance,  etc.) 

CROPS,  GROWING. 

Can  not  be  pledged 26 

Aliter  in  Louisiana  under  statute 27,  42 

CORPORATE  STOCKS.     (See  Stocks.) 

CREDITOR,  ORDINARY.     (See  Pledgee.) 

Right  of  attaching in  pledged  inheritance  inferior  to  that  of 

pledgee 51 

Under  civil  law  may  seize  pledge,  subject  to  pledgee's 

rights 255,  258 

Aliter  at  common  law 259 

But  seizure  must  not  impair  value  of  pledge 257 

A  showing  that  value  of  pledge  exceeds  pledgee's  claim  is  con- 
dition precedent  to  seizure  and  sale 260 

DEATH   OF  PLEDGEOR. 

At  common  law revokes  mandate  to  sell  pledge  unless  agent 

has  title 281  to  284 

Modification  of  doctrine 285 

Under  civil  law does  not  revoke  mandate 286  to  289 

DEBT. 

Meaning  of  term  in  civil  law 68,  69 

DEBTOR. 

At  civil  law of  '•  A ''  must  have  notice  of  seizure  by  creditor 

of  "'A  " IJ  etseq.,  533 

Aliter  at   common  law 18  etseq.,  533 


Index.  605 

DELIVERY.     ("See  Possession.) 

Section 

Actual  or  constructive of  thing  pledged  essential  ...8,  122,  128 

Of  incorporeal  rights  is  effected  by  transfer  of  title  under  Code 

Napoleon  and  Code  of  Louisiana 11,  12,  IS 

At  civil  law,  notice  to  creditor  of necessary  to  affect  third 

persons 11,  14,  1.53,  533 

Aliter  at  common  law 18,  153 

Impossibility  of prevents  pledge  of  property  to  be  acquired  in 

futuro 25  et  seq.,  41 

Constructive  of  an  inheritance 50,  55 

To  pledgeor  as  agent  of  pledgee,  must  be  for  his  account,  for 

special  piirpose  and  limited  in  time 128  to  135 

May  be  to   third  person,  who  accepts  trust  and  for  benefit  of 

pledgee 127,  139 

Not  necessary  where  pledgee  is  in  possession 143 

May  be  symbolical 144 

Of  bill  of  lading  in  Louisiana,  made  by  mailing 145 

Of  warehouse  receipts  or  keys 146  to  148 

Criticism  of  constructive  149,  1.50 

Constructive of  things  too  bulky  for  actual  151,  152 

Difference  between  in  sale  and  pledge 168 

DEPOSITARY. 

Has  lien  on  property  deposited,  for  expense  incurred  in  pre- 
serving it 529 

DILIGENCE. 

Degree  of required  of  pledgee  in  caring  for  pledge 266,  267 

ENGLAND.     (See  Bill  Lading,  Policies  of  Insurance.) 

Owner  can  not  recover  pledge,  even  if  pledgee  had  notice  that 
pledgeor  was  agent 482 

Pledge  only  invalid  where  pledgee  had  notice  that  pledgor  was 
without  authority  to  pledge 483 

Qucere — Is  there  a  distinction  between  factor  and  agent P..481  to  483 

EQUITABLE  LIEN.     (See  Tacit  Pledge,  Privilege,  Lien.) 

Analogy  between and  privilege 521,  543  et  seq.,  552 

Distinctions  between and  privilege 552  et  seq. 

Derived  from  the  civil  law 544,  551 

Follows  property  into  hands  of  transferees  who  have  notice 547 

Is  conferred  by  intention,  express  or  implied 547,  550 

Possession  of  property  subject  to remains  with  debtor 547 

How  created  and  on  what  it  bears 547,  548 

Check  drawn  on  designated  fund,  gives on  such  fund 549 

Real  as  well  personal  property  may  be  subject  to 549 

Instance  of  what  will  create by  implication 5.50 

Nature  and  theory  of  551  et  seq. 

Louisiana  jurisprudence  and  laws  connected  with  the  subject 

556  to  567 

Effect  given by  Federal  Courts,  conflict  with  statutory  law 

of  States : 561  to  565 

(Reference  in  note  to  "  89  La.  An."  should  be  "  39  La.  An.'") 


606  Index. 

Section. 

EQIUITY  JURISDICTION. 

Of  covirts  of  Louisiana 564  to  567 

ESTOPPEL. 

Pledgeor  can  not  deny  ownership  of  property  pledged  by  him 

43  et  seq. 

EXPENSE. 

Pledgeor  bound  for necessary  in  caring  for  pledge  ...270  to  274 

But  only  for  value  added  to  pledge  by  useful 270  to  274 

FACTOE,   Pledge   by.      (See    Warehouse    Eeceipts,    Power    of 
Attorney,  Bill  of  Lading  ) 

At  common  law can  not  pledge  property  of  principal 480 

Mandate  of is  only  to  sell 480 

Is  mei'e  agent  with  limited  and  specified  authority 481 

Relation  was  broadened  by  statute 481 

In  England  so  that  principal  is  bound  even  if  pledgee  bad 

notice  of  capacity 482 

Aliter.  if  pledgee  had  notice  that  factor  was  without 

authority 483 

In  New  York  the  statute  protects  the  pledgee  when  he  was 
without  knowledge  that  the  pledgeor  was  not  owner. ..484  to  4S6 

In  Massachusetts  the  rule  is  like  in  England 487,  488 

In  Louisiana  the  common  law  rule  obtaifas 489  et  seq. 

Though  statutes  seem  to  have  changed  it 493  et  seq. 

Under  the  civil  law  the  pledgee  in  good  faith  for  value  and 

without  notice  holds  against  owner 498  et  seq. 

And  this  though  agent  is  without  power  to  pledge  prop- 
erty of  principal 500 

The  rule  extends  to  pledge  made  by  any  bailee  or  de- 
positary (but  see  506) 501,  502,  505 

In  France  the  rule  is  perhaps  restricted  to  pledges  by 

—  (but  see  501,  502) 505,  506 

Definition  of in  Code  of  Commerce  of  France 505 

Distinction  between and  agent 505 

Has  lien  on  goods  of  principal  for  advances 519,  538 

FEDERAL  COURTS.  (See  Bills  of  Lading,  Substitution  of  Pledge, 
Stocks,  Policies  of  Insurance.) 

Jurisprudence  of in    Louisiana   concerning    Equitable 

Liens 561  to  565 

FIDUCIA. 

Origin  and  definition  of 544  to  546 

FRANCE.  (See  Commercial  Law,  Pledge  No.  1,  3,  Policies  of  In- 
surance, Prescription,  Tacit  Pledge,  Tortious  Pledge,  Warehouse 
Receipts.) 

Pledge  of  incorporeal  rights  in 11  to  24 

Lease   of    real    estate   may   be    pledged    in  ,  how  ef- 
fected   .". 56  to  59 

Commercial   law  of  pledge  in 325  et  seq. 


Index.  607 

FKANCE — Continued. 

Section. 

Bill  of  lading  in is  negotiable,  and  bona  fide  pledgee  or 

vendee  has  perfect  title ! 360 

When  made  to  designated  individual  is  not  negotiable 

and  transferee  can  not  hold  against  owner 337,  338 

''■Rentes  sur  VEtat  "   can  not  be  seized  but  may  be  pledged. ...4 

Definition  of  Factor  in  Code  of  Commerce  of 505 

Validity  of  sale  or  pledge  of  personal  property  in by 

agents 498  to  506 

Lessor's  right  of  pledge  in 524  to  529 

FRUITS  OF  PLEDGE.     (See  Use.) 

Pledgee  may  receive 210,  212 

Must  account  for to  pledgeor..    211  et  seq. 

GIVE,  TO. 

Meaning  of  term  in  civil  law 69,  70 

GERMANY. 

Commercial  law  of  pledge  in  330 

HEIR.     (See  Inheritance.) 

HOLLAND. 

Commercial  law  of  pledge  in 330 

Bill  of  lading  in is   negotiable,   and   bona  fide   vendee  or 

pledgee  has  perfect  title .*. 360 

HYPOTHECA. 

Origin  andmeaningof ,544  to  546,  552 

ESrCORPOREAL  RIGHTS.     (See  Inheritance,  Lease  of  Real  Estate.) 

Could  not  at  one  time  be  pledged 10 

Aliter  under  modern  common  and  civil  law 11 

Are  transferred  under  Louisiana  and  Napoleon  Codes  by  pledge  11 

Effect  thereof  as  to  third  persons 11 

Mode  of  transferring under  Louisiana  Code 12 

Distinction  between  transfer  of for  pledge  and  for  owner- 
ship    13 

Under  Louisiana  Code,  debtor  must  have  notice  of  transfer  of 

14,  533 

This  notice  is  also  necessary  in  France 15,  16 

But  notice  necessary  only  to  affect  third  persons 17 

Notice  of  transfer  of not  necessary  under  common  law  18  to  20, 

335 

Only  movable can  be  pledged  under  Louisiana  and  Napoleon 

Codes 21,  22 

What  are  movable  and  immovable 21  to  24 

INDIVISIBILITY  OF  PLEDGE. 

The  pledge  secures  every  portion  of  the  debt 290  to  293 


608  Index. 

INHERITANCE.     (See  Incorporeal  Rights.) 

Section. 

Under  civil  law  an can  not  be  pledged  before  death  of  an- 
cestor   46 

Aliter   after  death,   where  estate  is  composed  of  movable 

property 46,  52  to  54 

At  common  law,  pledge  of is  valid  both  before  and  after 

death  of  ancestor 48  to  51.  55 

Constructive  delivery  of  an 50,  55 

INNKEEPER. 

Has  lien  on  effects  of  traveler  for  board  or  lodging 519,  530,  538 

INSOLVENCY  OF  PLEDGEOR.     (See  Syndic.) 

The does  not  impair  rights  of  pledgee 260  et  seq. 

And  does  not  revoke  his  mandate  to  sell  pledge 278  to  280 

INSURANCE.     (See  Policies  of  Insurance.) 

ITALY. 

Bill  of  lading is  negotiable,  and  bona  Me  pledgee  or  vendee 

has  perfect  title 360 

KEYS  OF  WAREHOUSE. 

Delivery  of constitutes  deliverv  of  property  contained  there- 
in   ^. 146  to  148 

LAW  MERCHANT.     (See  Negotiable  Paper.) 

Controls  commercial  pledges 271 

LEASE  OF  REAL  ESTATE.     (See  Lessor's  Right  of  Pledge,  Rent.) 

May  be  pledged 56 

Pledge  of  — —  how  effected  in  Louisiana 56 

How  in  France 57  to  59 

LEbtoEE. 

Rights  of under  pledge  the  law  gives  lessor 524  et  seq. 

LESSOR. 

Civil  law  gives right  of  retaining  possession 519,  523  et  seq. 

Analogous  to  right  of  distress  at  common  law 519,  525  539 

Difference  between  Codes  Louisiana  and  Napoleon  on right 

of  pledge 524  et  seq. 

Criticism  of  Louisiana  jurisprudence  on  subject 528 

Pledge  is  tacit,  because  ancillary  to  contract  of  lease 529 

At  common  law may  take  lessee's   property  on  premises, 

without  intervention  of  law 539 

Aliter  at  civil  law 540,  541 

Exemptions  from  lien,  etc.,  in  Louisiana 542 


pup  Index.  609 

LIEN.     (See  Equitable  Lien,  Privilege.  Tacit  Pledge.) 

Section. 

Holder  of is  without  right  in  or  to  the  property 51S.  534 

Analogies   between   common  law  and  tacit  pledge  at  civil 

law 519,  538 

Differences  between  them 535,  53G 

Workman  has on  article  made  or  repaired  by  him,  for  price 

of  labor 519,  538 

Innkeeper  has on  effects  of  traveler  for  board  or  lodging 

519,530,  538 
Lessor  has  — —  on   property   of   lessee  for  rent  of  premises 

519,524,  539  et  seq. 

Factor  has on  goods  of  principal,  for  advances 519,  538 

The  common  carrier  has  — —  on  goods,  for  freight  earned  in  car- 
riage  519,  538 

The  depositary  has for  expense  incurred  for  preservation  of 

property  , 529 

The  attorney  has  — —  for  his  fee.  on  property  recovered  for  client.. 528 

To  be  effective,  property  must  be  in  possession  of  creditor .534 

At  civil  law,  the  arises  from  nature  of  creditor's  claim 534 

It  can  not  be  created  by  contract  and  is  stricti  juris  536 

Aliter  at  Coumion  law 537 

LOUISIANA.  (See  Bill  of  Lading,  Lessor.  Cbattel  Mortgage. 
Pledge  No.  3,  Pledgee,  Policies  of  Insurance.  Possession,  Prescrip- 
tion, Privilege,  Seizure,  Sale.  Stocks.  Tacit  Pledge,  Vessels,  Ware- 
house Receipts. ) 

Pledge  of  incorporeal  rights  in 11.    24 

Seizure    of   debts    due   debtor,   how   effected,   notice  required 

11  et  seq.,  533 

Growing  crops  may  be  pledged  in 27,    42 

Lease  of  real  estate  maj'  be  pledged  in 56 

Deed  executed  in  common  law  form,   valid  as   conventional 

mortgage  in  112 

Delivery  of  bill  lading  in made  by  mailing  145 

Consignee's  privilege  primes  vendor's 145 

Pledgee  can  not  in acquire  pledge  by  prescription,  but  debt 

kept  alive  by  possession  of  pledge 173 

Bill   lading   made   to   designated   individual  is  not  negotiable 

in and  transferee  can  not  hold  against  owner 337,  338 

Pledgee  can  not  sell  pledge  in unless  authorized  by  contract      , 

307  et  seq. 

But  by  contract  may  sell  at  private  sale  or  auction 307  et  seq. 

Pledge  in must  be  by  written  act,  except  for  promissory 

notes,  etc .316 

Factors  can  not  pledge  property  of  principal  in  489  et  seq. 

Though   governed  by  civil  law.  follows  common  law  in  com- 

mei'cial  affairs 490 

Liens  in arise  from  nature  of  creditor's  claim,  can  not  be  es- 
tablished by  contract 534  to  536 

Lessor's  right  of  pledge  in 524  et  seq.,  540,  .541 

Exemptions  from  lessor's  lien,  etc..  in .542 

Jurisprudence  and  laws  of relative  to  equitable  liens.  556  to  .567 

Reference  on  p.  513  to  '•  89  La.  An,"  should  be  to  '•  39  La.  An." 

Equity  jurisdiction  of  courts  of •  its  laws  and  jurisprudence 

564.  565  et  seq. 
Effect  given  Equitable  Lien  in by  Federal  Courts,  conflicts 

with  Statute 561  to  565 


610  Index. 

LIMITATION,  Statute  of.     (See  Prescription.) 

Section. 

At  common  law bars  right  of  action  for  debt  secured  by 

pledge,  but  does  not  bar  right  of  pledgeor  to  pledge 7 

Aliter  under  civil  law 173 

MARGINS.     (See  Broker.) 

MARYLAND.     (See  Bills  of  Lading,  Warehouse  Receipts.) 

MASSACHUSETTS.     (See  Warehouse  Receipts.) 

Right  of  agent  in— to  pledge  personal  property .487,  488 

MISSISSIPPI.     (See  Substitution  of  Pledge.) 

MISSOURI.     (See  Bills  of  Lading.) 

MONEY. 

May  be  given  in  pledge 9 

MORTGAGE.     (See  Pledge,  Chattel  Mortgage.) 

Distinction  between  and  pledge 27  etseq..  167 

Acquisitions  in  fiituro  may  be  subjected  to but  can  not  be 

pledged 28.  29 

Pledge  and not  clearly  distinguished  in  Roman  law 31 

Nor  in  the  Common  law 39  et  seq. 

Aliter  by  the  French  civilians 32.  33,  34 

Errors  of  Judge  Story  on  subject 28,  35  to  38 

Executed  in  common  law  form,  effect  of  in  Louisiana 112 

Pledgee  must  reinscribe in  proper  time 270 

Equity  of  redemption  can  not  be  waived  by  mortgagor 304 

MOVABLES.     (See  Personal  Property.) 

NEGOTIABLE  PAPER.     (See  Bills  of  Lading.  Warehouse  Receipts.) 

Right  of  pledgee  of  to  repledge 205.  207.  215.  230 

Pledgee  of must  preserve  rights  againstendorser  by  protest.  270 

Pledge  of controlled  by  law   merchant .314  to  31li.  321 

And  act  in  writing  not  necessary 317 

Right  of  pledgee  to  sell must  be  stipulated 317 

Mav  validly  be  pledged  before  maturitv  by  others  than  owner 

318  to  320.  323  to  325 

Alitn-  after  maturity  322  et  seq. 

Even  after  maturity  pledge  valid  in  some  States 321 

A   pre-existing   debt  is  a  valid   consideration   for   the   pledge 
of  in  souie  States;  Aliter  in  others 321 

NEW  YORK.     (See  Policies  of  Insurance,  Warehouse  Receipts.) 

Pledgee  in without  notice  of  pledgeor's  want  of  authority 

holds  pledge  against  owner. 484  to  4S6 

Aliter  where  consideration   for  pledge  was  a  pre-existing 
debt  of  pledgeor 321 

OBLIGATIONS. 

All  valid may  be  secured  by  pledge ..    —  65.  67.  71 

Of  third  persons,   may  be  secured   by   delivery  of   pledgeor"s 

property 72 

Effect  of  such  pledges 73  to  75 


y 


Index.  611 

OBLIGATIONS— Continued. 

Section. 

Xullity  of releases    pledge 76.  77 

Aliter  where  nullity  of arises  from  incapacity  personal  to 

debtor 76,  77 

The   law  will   not  aid  recovery  of  pledge  given  for  illegal  or 

immoral  purpose 77  to  89 

Aliter  where  the  contract  is  not  executed 82,  83 

OWXEESHIP. 

Pledgeor  retains of  property  pledged ]08 

Pledgee,  even  by  stipulation,  can  not  acquire of  pledge  in 

payment  of  claim 2'J9  to  802 

Such  stipulation  valid  after  maturity  of  debt 308  to  80.") 

PATENT  OF  INVENTION. 

Maybe  pledged _^ 69 

Pledgee  of without  right  to  work  invention 63 

Notice  of  pledge  of not  necessary 154 

PAYMENT. 

Meaning  of  in  civil  law 68.  69 

Of  obligation,  extinguishes  pledge 194 

PERSONAL  PROPERTY.    (See  Factor,  Incorporeal  Rights.  Inherit- 
ance). 

Possession  of is  equivalent  to  title oOi 

Distinction  between  common  and  civil  law  in  this  respect 507 

Reason  for  common  law  rule 508  et  seq. 

At  commun  law,  possession  of confers  only  prima  facie  title 

509  et  seq. 

And  vendee  or  pledgee  of acquire  only  the  title  of  vendor  or 

pledgeor 510  et  seq. 

Criticism  of  common  law  rule 511  to  516 

Superiority  of  civil  law  rule 517 

PIGNORATIVE  CONTRACT. 

Nature  of 116  et  seq. 

Distinguished  from  sale  with  right  of  redemption 117  et  seq. 

Gives  creditor  nolienor  privilege  against  third  persons.  121.  158, 159 

PIGNUS. 

Origin  and  definition  of 544  to  546 

PLEDGi:.     (See  Pledgeor,  Pledgee,  Tortious  Pledge,  Creditor.) 

1.  Objects  of  Pledge. 

What  may  be  pledged .1,  3,  4,  9,  11 

What  may  not  be  pledged 8,  21,  22,  25,  26,  28,  56,  63,  64 

Incorporeal  rights  could  formerly  not  be 9 

Aliter  under  modern  common  and  civil  law 11 

Immovable  incorporeal  right  can  not  be 21,  22 

Nor    incorporeal    rights    not    evidenced    by    muniment  of 
tide 12.  153  et  seq..  1(!(!.  167 


612  Index. 

pledge-Continued. 

Section. 
But  may  be  pledged  by  written  act  of ;  the  act  constitut- 
ing delivery  of  the  credit. 169  et  seq. 

Nor  property  to  be  acquired  in  futuro 25  et  seq. 

Aliter  under  statutes 25,  42 

Property  of  others  than  pledgeors  may  be  pledged  by  delivery  43,  72 

Effect  thereof  against  owner 44.  45,  73  to  75 

The may  by  contract  be  made  to  cover  the   debt  incurred 

subsequently  294  to  296 

Aliter  in  France  and  other  countries  of  Europe 297,  298 

(See  Inheritance,   Patent,  Lease.   Rent,  Policies  of  Insurance, 
Warehouse  Receipts,  Negotiable  Paper,  Bills  of  Lading.) 

2.  Purpose  and  Fokm  of  Pledge. 

Object  and  purpose  of 2,  5 

Detinition  of ." 66,  68 

Chattel  mortgage  and distinguished 87,  88,  101 

Form  and  essentials  of 8,  84 

At  civil  law,  act  of must  be  in  writing,  except  commer- 
cial pledges 89.  91.  317 

Right  of  sale  by  pledgee  must  be  stipulated 317 

Written  act  not  necessary  at  common  law 98 

Pledge  of  negotiable  paper  controlled  by  law    mer- 
chant  314  to  316 

Property  pledged  must  be  described  ih  act  of 92,  93 

But  act  need  not  be  in  any  certain  form 94 

And    written    act    necessary   only   against    third  per- 
sons    95  to  97 

Validity  of when  in  form  of  sale 98  et  seq.,  116  et  seq. 

Objections  to in  form  of  sale 101,  102,  110,  116  et  seq. 

(See  Mortgage,  Lien.  Equitable  Lien.  ) 

3.  The  Contract,  Its  Requirements  and  Effect. 

The   contract  of 5,  6 

Possession  of~by  pledgee  is  precarious 7 

But  duration  of  possession  not  limited 6 

Pledgee  can  not  acquire  ownership  of    7 

LTnder  Codes  Napoleon   and  Louisiana of  incorporeal  rights 

is  transfer  of  rights 11 

Effect  of  such  transfer 12 

Transfer  for  pledge  is  not  equivalent  to  ownership 13,  113 

Debtor  of  incorporeal   right   must  have   notice  of  transfer 

14,  153  et  seq. 

Effect  of  such  notice 15  to  17,  153  et  seq. 

Notice  not  necessary  under  common  law 18  to  20 

Nor  at  civil  law  of  incorporeal  things  which  are  not 

credits 154 

Any  legal  obligation  may  be  secured  hy 65,  67 

The  obligation   of  one   may    be   secured    by of    another's 

property 72 

Effect  of  such  a  transaction 73,  75 

Nullity  of  obligation,  invalidates 75.  76 

Aliter  where   nullity  is   caused  by   incapacity    personal  to 
debtor 75.76 


Index.  613 

PLEDGE— Continued. 

Section. 

The  law  will  not  aid  recovery  of given  for  immoral  or  illegal 

purpose 77,  80 

Aliter  where  the  immoral  contract  is  not  yet  executed 82,  83 

(See  Presei'iption,  Possession,  Delivery.  Pignorative   Contract, 
Sale.) 

4.  Miscellaneous. 

The of  usufruct  of  a  thing,  is  not of  thing  itself 24 

Fruits  of  things  pledged  become  part  of 25 

An  agreement  to maj^  be  enforced 41 

The is  indivisible,  and  secures   every  part  of  the  obligation 

290  to  293 

PLEDGEE.  (See  Prescription,  Pledgeor,  Pledge,  Creditor,  Possession.) 

Eights  of in  pledged  inheritance,  against  subsequent  creditor..  51 

Eights  of -in  pledged  patents 63 

In  works  of  the  Mind 64 

At  civil  law is  without  title  in  thing  pledged 113 

And  can  not  use  things  pledged — is  mere  depositarv..l99  et  seq. 

Exception  to  rule ' 209.  213 

Has  right  only  to  proceeds  of  pledge 200,  255  to  258 

Aliter  at  common  law,  where  right  is  in  the  thing. .200,  259 

At  common  law may  use  thing  pledged. .202,  210,  213,  224  et  seq. 

But  use  must  not  injure  thing,  and  is  at  peril  of 225,  226 

Criticism  of  common  law  doctrine 227 

The— —may  receive  fruits  of  thing  pledged 210  to  112 

But  must  account  for  them 211  et  seq. 

May  receive   and  enforce  payment  of  claims  pledged  with 

him 207,  212,  213,  266  to  270 

Eight  of to  subpledge  questioned 205,  207,  215  to  217 

Limitation  of  right  by  Judge  Story 228 

But  right  now  fully  established 2l4  et  seq,,  229,  230 

The may  transfer  his  claim,  with  pledge 222 

The^ — —not  bound  to  surrender  pledge  to  assignee  or  syndic  of 

pledgeor 260  to  263 

Difficulties  and  limitation  of  the  rule 264,  265 

Degree  of  diligence  required  of in  preservation  of  pledge. 266,  267 

Liability  if  pledge  is  stolen 268,  269 

For  neglect  to  enforce  right  arising  under  pledge :..270 

Special  skill  not  required  in  care  or  administration  of  pledge 

unless  specially  agreed 270 

The may  recover  necessary   expense  incurred  in  caring  for 

pledge 270  to  274 

If  expense  only  useful,  then  only  for  value  added  to  pledge 

270  to  274 

At  civil  law may  demand  another  pledge,  when  deceived  in 

thing  pledged 275.  276 

Or  may  rescind  contract  and  demand  immediate  payment  .  276 
Aliter  at  common  law,  where  he  has  only  action  in  damages. 277 

Even  by  contract can  not  appropriate  pledge  in  payment  of 

debt 299  to  302 

May  do  so  by  contract  after  maturit}^  of  claim 303  to  305 

Under  civil  law can  not  sell  pledge  without  judgment 306 

Aliter  if  pledge  consists  of  commercial  paper,  when  sale  may 

be  stipulated 306,  317 

In  Louisiana,  sale  may  be  stipulated 307  to  B09,  317 


614  Index. 

PLEDGEE— Continued. 

SECTIO>f. 

At  common  law may  sell  at  public  auction  after  notice 310 

And  may  stipulate  for  private  sale      310 

The- may  be  purchaser  at  sale  of  pledge 311 

Even  when  under  the  contract  he  is  vendor .312,  313 

PLEDGEOK. 

May  pledge  his  property  to  secure  obligation  of  another 72 

Rights  of when  pledged  property  pays  debt 73  to  76 

The is  released  by  nullity  of  obligation  of  debtor 75.  76 

Aliter    where    nullity    is    caused  by  incapacity  personal  to 

debtor 75,  76 

The  law  will  not  aid  the to  recover  property  pledged  for 

illegal  oriramoral  purpose 77  to  80 

Aliter  when  the  contract  is  not  yet  executed 82,  83 

The retains  ownership  of  thing  pledged 108, 113 

At  civil  law may  perhaps  revendicate  pledge  acquired  by 

pledgee  by  prescription 176  to  182 

May  rescind  contract  of  pledge  for  misuse  of  pledge 240  to  254 

Assignee  or  syndic  of occupies  same  position  as 260  to  263 

Difficulties  and  limitations  of  rule 264,  265 

POLICIES  OF  IXSURANCE. 

Pledgee  must  renew  when  requested 270 

Premiums  on paid  by  pledgee  form  part  of  secured  debt 274 

Life,  tire  or  marine n)ay  be  pledged.. 444 

At  common  law,  simple  delivery  of suffices 444 

But  where  payee  is  designated,  his  endorsement  is  necessary  445 

In  England  it  is  more  common  to  mortgage  than  to  pledge 446 

Steps  necessary  to  effect  pledge  of at  civil  law  and  in  Louis- 
iana  447 

Policy    void    if    pledged    or    transferred    without  consent  of 

insurer .450,  455 

But  insurer  alone  can  demand  nullity  of but  not  of 

pledge 452 

Assignment  or  pledge  of on  life  to  one  not  having  insurable 

interest 453  et  seq. 

Defeasible  if  issued  to  one  without  interest 453 

Therefore  defeasible  it  pledged  or  assigned  in  that  way..463,  454 
The  question  not  settled  in  France  455,  464 

In  Belgium  the  iss?(e  is  prohibited  456 

Rule  in  Supreme  Court  of  United  States 457,  465 

In  England  if was  valid  when  issued,  it  may  be  trans- 
ferred to  any  one 461  to  463 

Rule  in  New  York  and  other  States  is  like  that  of  England 

458.  459.  463 

A on  life  is  an  agreement  to  paj'  a  certain  sum  of  money 

458,  460  to  463 
Under  rule  of  United  States  Supreme  Court  creditor  can  hold 

only  for  amount  of  debt .465.  466 

When  debt    is  paid -being  only  security  must  be  reas- 
signed   467 

In   France obtained  by  creditor  remains  his,  if   debtor  was 

not  charged  with  premiums — Creditor  may  in  addition  recover 
debt 468,469 


Index.  615 

POSSESSIOX.     (See  Delivery.) 

Section. 

Of  thing  pledged  is  essential 8,  84  et  seq.,  122,  125,  126 

Maybe  actual  or  constructive g 

Of  inheritance  in  expectancy,  how  acquired 50 

Examples  of by  pledgee's  agent  123  et  seq. 

Control  of  pledge,  not  equivalent  to 126 

May  be  by  agreed  depositary,  who  accepts  trust ...127 

But must  be  for  benefit  of  pledgee 127 

By  pledgeor,  must  be  for  account  pledgee  and  for  special  pur- 
pose  128  to  135 

May  begin  before  or  after  creation  of  debt  secured  by  pledge 

136,  142.  143 

In  Mississippi is  destroyed,  if  pledged  property  is  substi- 
tuted  137 

Aliter in  Federal  Courts  and  in  other  States 137  et  seq. 

Distinction  between  common  and  civil  law  in  — —  of  pledge  by 

the  pledgee 162  et  seq. 

Of  incorporeal  rights  must  be  apparent 164  et  seq. 

Difference  in for  purpose  of  sale  and  pledge 167 

What  is  sufficient  at  common  law  for  incorporeal  rights 

169  et  seq. 

Of  pledgee  is  not  as  owner 173 

Under   Codes    Napoleon  and   Louisiana  prescriptive  title  ac- 
quired by after   payment  of  obligation 173  to  175 

But  pledgeor  may  perhaps  revendieate 176  to  182 

At  common  law does  not  confer  title 184  to  186,  196,  197 

Except  where continued  for  ''  long  lapse  of  time  "  ....184  to  186 

At  civil  law ■  prevents  prescription  of  debt 183  et  seq.,  195 

Aliter  at  common  law 189  to  192,  196,  198 

POWER  OF  ATTORNEY. 

To  sell  pledge,  is  not  revoked  by  bankraptcy  of  pledgeor. ..278,  279 

Nor  by  his  death,  at  civil  law 286  to  289 

Aliter  at  common  law,   unless  title  to  pledge  was  in  agent. 

281  to  284 

Modification  of  doctrine 285 

PRESCRIPTION.     (See  Limitation,  Statute  of.) 

Does  not  affect  pledge 7,  173,  183 

At  civil  law  the  debt  secured  by  pledge  is  not  affected  by 

7,  173,  183,  197 

Aliter  at  common  law  187  to  193,  198 

In  France  and  Louisiana  pledgee  acquires  title  by if  he   re- 
tains possession  of  pledge  after  payment  of  obligation  .173  to  175 
But  it  seems  that  the  action  of  revendication  is  still  left  the 

pledgeor 176  to  182 

At  common  law  pledge  can  not  be  acquired  by 184  to  186 

But  if  "after  a  long  lapse  of  time"   without  a  claim  of  re- 
demption, the  right  is  extinguished 184  to  186 

PRIVILEGES— Civil     Law.     (See    Liens,    Equitable    Liens,    Tacit 
Pledge.) 

Distinction  between- — and  pledge 520,  521 

Are  analogous  to  equitable  lien  at  common  law.. ..521,  543  et  seq,  552 

In  Louisiana are  fixed  by  statute 529  et  seq. 

Are  creatures  of  law,   can  not  be  created  by  contract,  and  are 
stricti  juris 536,  552  to  555 


616  Index. 

Section', 
RECEIPTS.     (See  Warehouse  Receipts.) 

EECEIVER.     (See  Syndic.) 

REDEMPTION.     (See  Sale.) 

Right  of  — —  at  civil  law  in  contract  of  sale 1]4.  115 

Distinguished  from  equity  of in  common  law  mortgage. 115 

Waiver  of  equity  of in  mortgage  is  void 303 

Pledgeor  may  redeem  pledge,  though  he  stipulated  that  pledgee 

should  retain  it  in  payment  of  claim 299  to  302 

But  can  not  do  so  if  stipulation  made  after  maturity  of  obli- 
gation   303  to  305 

RENT.     (See  Lease.) 

May  be  pledged  at  common  law 60 

Aliter  at  civil  law 61.    62 

RESCISSION   OF   CONTRACT    OF   PLEDGE.     (See  Resolutory 
Condition.) 

Pledgee  may  demand  — —  for  misuse  of  pledge 240  et  seq. 

REPLEDGE.     (See  Subpledge.) 

RESOLUTORY  CONDITION.     (See  Rescission.) 

The is  implied  in  contract  of  pledge 240  et  seq. 

SALE.     (See  Pignorative  Contract.) 

Pledge  in  form  of 98  et  seq.,  116  et  seci. 

Effect  of with  right  of  redemption 114,  115,  119,  120 

Effect  of  simulated  as  security 119  to  121,  159 

Every  species  of  incorporeal  right  may  be  subject  of 158  et  seq. 

But  possession  must  be  apparent  and  notorious 158  et  seq. 

The of  a  credit,  without  muniment  of  title,  as  a  disguised 

pledge,  is  without  effect  against  third  persons  (but  see  169) 

158  et  seq. 

Under  civil  law of  pledge  must  be  preceded  by  judgment    .306 

AUter  under  statutes  in  pledge  of  commercial  paper 306 

In  Louisiana  parties  may  agree  to of  pledge 307  et  seq. 

At  common  law  pledgee  may  sell  at  public  auction  after  reason- 
able notice  to  pledgeor 310 

And  parties  may  stipulate  for  private 310 

And  pledgee  may  buy  at  private  or  public 311  to  313 

Even  when,  under  the  contract,  he  is  vendor,  if  it  be  so 
stipulated 311  to  313 

SEIZURE— Judicial. 

Creditor  by has  tacit  pledge  or  lien 531,  533 

In  Louisiana  debtor  must  have  notice  of of  credits.. 11  et  seq.,  533 

Aliter  at  common  law 19  et  seq..  533 

STATUTORY  PLEDGE.     (See  Lien,  Tacit  Pledge.) 

Criticism  of  term 522,  523 


Index.  617 

STOCKS.     (See  Broker.) 

Section. 

Development  of  right  to  pledge  shares  of 409  to  411 

Transfer  of  on  books  of  corporation  necessary  for  valid 

pledge  (but  see  414) 412  et  seq. 

Pledge  without  such  transfer  not  good  against  creditor  of 

pledgeor 415 

Aliter  in  Louisiana 419,  427  to  431 

Provision  in  charter  of  corp.  that  sale  is  not  valid  with- 
out transfer  does  not  affect  pledge 431 

Aliter  in  other  States,  at  least  for  debts  due  corp.  by 

transferror  before  pledge 432 

Pledgee  of transferred  succeeds  to  liability  of  pledgeoi'..415,  416 

And  real  pledgee  is  liable,  though  transfer  is  to  intex'posed 

irresponsible  party .415 

But  the   liability   doubtful,    where   pledgeor  received   the 

dividends 417 

Under  National  Bank  act,  transferee  though  not  owner  is  liable 

as  shareholder 418 

Qualification  of   doctrine,  and  rules  of  Supreme   Court  of 

United  States 424  to  426 

Statutory  exception  to  rule,  that  transferee  holding  as  pledgee 

is  liable 420 

And  parties  to   pledge,   by  endorsement  on  certificate   or 

books  of  corp.  may  relieve  pledgee  from  liability 421 

Liability  of  pledgee  of pledged  by  corporation  itself... 422,  423 

Pledgee  of is  entitled  to  dividends   ..433 

But  corporation  must  have  notice  of  pledge 434 

If  corporation  without  notice  pays  to  pledgeor  pledgee  may 

recover  from  him 434,  435 

Pledgee  may  sell without  notice  and  at  private  sale,  if  it  is  so 

stipulated 436 

And  may  substitute  other  shares  for  those  pledged 437,  438 

Criticism  of  right  to  substitute 439,  442 

But  where  stipulated,  right  to  substitute  approved  by  some 
civilians 443 

STOLEN  PROPERTY. 

Pledgee  of  lost  or can  not  hold  against  owner 503 

SUB PLEDGE. 

Right  of  pledgee  to questioned 205,  207.  215  to  217 

Denied  at  civil  law 217  et  seq. 

Generally  admitted  at  common  law 224,  229,  230 

Limitation  of  doctrine  by  Judge  Story 228 

Rights  of  subpledgee 216,  217 

Pledgee  of  negotiable  paper,  acquired  from  another  than  owner, 
may  validly 324 

Broker  may stocks  held  for  customer 473,  474 

SUBSTITUTION  OF  PLEDGE.     (See  Stocks.) 

In  Mississippi,  the by  other  things  destroys  pledge 137 

Aliter  in  Federal  Courts 137  et  seq, 


618  Index. 

TACIT  PLEDGE.    (See  Liens,  Privilege,  Equitable  Lien.) 

Section'. 

Criticism  of  term 520 

True  meaning  of 523  et  seq. 

Is  contracted  under  law,  permitting  creditor  to  retain  posses- 
sion   523  et  seq. 

As  between  lessor  and  lessee 519,  524  et  seq.,  538 

As  between  innkeeper  and  guest 519,  .530,  538 

Of  workman  on  property  repaired 519,  538 

Of  caiTier  for  freight  earned 519.  .538 

As  between  factor  and  principal 519,  538 

Of  attorneys  on  property  recovered  for  clients 538 

T)istinction  between  Codes  Napoleon  and  Louisiana  on  subject 

524  et  seq. 

Criticism  of  jurisprudence  of  Louisiana  on  subject 528 

Kesults  in  favor  of  creditor  by  judicial  seizure  of  debtor's  Ppp-_^ 

erty 531,  533 

But  seizure  must  be  accompanied  by  taking  possession        532 

Is  effective  only  when  property  is  in  possession  of  pledgee 534 

Analogy  and    difference    between  and    lien  at  common 

law 519.  535.  530 

TORTIOUS  PLEDGE. 

Pledge  of  another's   personal  property,  other  than  negotiable 

paper,  is  invalid 231,  233,  234,  238,  239 

Aiiter  in  France,  Belgium,  Holland  and  Italy 232,  234  to  239 

USE.     (See  Fruits  of  Pledge.) 

At  civil  law  pledgee  has  not of  pledge 199  et  seq. 

Aiiter  under  common  law "202,  210,  213 

Exception  to  civil  law  rule '209,  213 

Right  to  sabpledge 205,  207,  214 

USUFRUCT. 

Of  real  estate  can  not  be  pledged 


Pledge  of of  thing  is  not  pledge  of  thing 24 

VESSELS. 

Pledge  of valid  when  in  form  of  sale 101.  102 

Chattel  mortgage  on effective  as  pledge  in  Louisiana 123 

WAREHOUSE    RECEIPTS.     (See    Bills    of    Lading,   Negotiable 
Paper,  Incorporeal  Rights.) 
Like  a  bill  of  lading,  it  is  not  a  symbol  of,  but  a  muniment,  of, 

title  to  goods 386 

Is  quasi  negotiable.     Holder  for  value  of  has  indefeasible 

title  against  maker 387 

Pledgee  of  has   only  pledgeor's   title,  true  owner  can  re- 

cover •• " ooo«  oov 

Rule  in  Louisiana  and  Maryland 390  et  seq. 

Criticism   of   decisions  interpreting  statutes   of   Louisiana 

392.  401 


Index.  619 

WAREHOUSE  KECEIPTS -Continued. 

Section. 

In  some   countries    of    Europe.    Marj^lancl   and   Massachusetts 

pledgee  of holds  against  owner 

352,  399,  400.  482,  487,  498  et  seq. 
Conflicting  decisions  of  Xew  York   courts  of  "Factor's  Act" 

402  to  404 
As  with  bill  of  lading,  if  owner  has  given  indicia  of  ownership 

to  agent,  he  may  validly  pledge 406.  407 

Law  of  France  concerning 408 

WISCOXSIX.     (See  Bills  of  Lading.) 

WORDS  AND  PHRASES. 

Debt,  meaning  of,  at  civil  law (ji) 

Factor,  detinition  of  in  Code  of  France r)0o 

Ficlucia.  origin  and  meaning  of 544  to  546 

Hypotheca,  origin  and  meaning  of .544  to  546 

Ownership,  detinition  of 333 

Payment,  meaning  of  at  civil  law 68.  69 

Pignus,  origin  and  meaning  of 544  to  546 

Pledge,  definition  of 66,  68 

Statutory  pledge,  criticism  of  term 522,  523 

Tacit  pledge,  criticism  of  term .520.  523 

To  Give,  meaning  of  term  at  civil  law (59.  70 


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